Wielson Company employs flexible budgeting techniques to evaluate the performance of several of its activities. The selling expense flexible budgets for three representative monthly activity levels are shown below.

The following assumptions were used to develop the selling expense flexible budgets.
- The average size of Wielson's sales force during the year was planned to be 75 people.
- Salespersons are paid a monthly salary plus commission on gross dollar sales.
- The travel costs are best characterized as a step variable cost. The fixed portion is related to the number of salespersons while the variable portion tends to fluctuate with gross dollar sales.
- Sales office expense is a mixed cost with the variable portion related to the number of orders processed.

- Shipping expense is a mixed cost with the variable portion related to the number of units sold.
A sales force of 80 persons generated a total of 4,300 orders resulting in a sales volume of 420,000 units during November. The gross dollar sales amounted to \(\$ 10.9\) million. The selling expenses incurred for November were as follows:

{Required:}

(a) Explain why flexible budgeting is a useful management tool.

(b) Explain why the selling expense flexible budgets presented above would not be appropriate for evaluating Wielson Company's November selling expenses, and indicate how the flexible budget would have to be revised.

(c) Prepare a selling expense report for November that Wielson Company can use to evaluate its control over selling expenses. The report should have a line for each selling expense item showing the appropriate budgeted amount, the actual selling expense, and the monthly dollar variation.

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Representative Monthly Flexible Budgets for Selling Expenses Activity measures: Unit sales volume Dollar sales volume 400,000 425.000 450,000 .$10,000,000 $10,625,000 $11,250,000 Number of orders 4,000 4,250 4,500 Number of salespersons. 75 75 75 Monthly expenses: Advertising and promotion ... $ 1,200,000 $ 1,200,000 $ 1,200,000 Administrative salaries 57,000 57,000 57,000 Sales salaries 75,000 75,000 75,000 Sales commissions 200,000 212,500 225,000 Salesperson travel Sales office expense Shipping expense Total selling expenses 170,000 175,000 180,000 490,000 498,750 507,500 675,000 712,500 750,000 $ 2,867,000 2,930,750 $ 2,994,500