As sales manager, Sam Batista was given the following static budget report for selling expenses in the Clothing Department of Garza Company for the month of October.

As a result of this budget report, Sam 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. Sam 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 Sam.

(b) Should Sam have been reprimanded?Explain.

GARZA COMPANY Clothing Department Budget Report For the Month Ended October 31, 2011 Difference Favorable F Unfavorable U 2,000 F Budget 8,000 Actual Sales in units 10,000 Variable expenses Sales commissions Advertising expense Travel expense Free samples given out 2,000 2,600 850 4,000 1,300 8,0008,750 600 U 800 3,600 1,600 50 U 400 U 300 F 750 U Total variable Fixed expenses Rent Sales salaries Office salaries Depreciation-autos (sales staff) 1,500 1,200 800 500 4,000 $12,000 $12,750 1,500 1,200 800 500 4,000 -( -( Total fixed Total expenses 750 U