As sales manager, Enzo Colombo was given the following static budget report for selling expenses in the Clothing Department of Lugano Textiles for the month of October.

As a result of this budget report, Enzo was called into the president’s office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his costs to get out of control. Enzo knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice.

Instructions

a. Prepare a budget report based on flexible budget data to help Enzo.

b. Should Enzo have been reprimanded? Explain.

Transcribed Image Text:

Lugano Textiles Clothing Department Budget Report For the Month Ended October 31, 2020 Difference Favorable F Unfavorable U Budget Actual 10,000 Sales in units 8,000 2,000 F Variable expenses CHF 2,400 CHF 2,600 CHF200 U Sales commissions Advertising expense Travel expense 850 720 130 U 4,100 3,600 500 U Free samples given out 1,600 1,400 200 F Total variable 8,320 8,950 630 U Fixed expenses 1,500 1,500 Rent -0- 1,200 1,200 Sales salaries -0- Office salaries 800 800 -0- Depreciation-autos (sales staff) 500 500 -0– Total fixed 4,000 4,000 -0- Total expenses CHF630 U CHF12,320 CHF12,950