I already answered part 1 - please answer part 2.

Problem 23.7A, pages 1028-1029

Preparing and Using a Flexible Budget

Snells is a retail department store. The following cost-volume relationships were used in developing a flexible budget for the company for the current year.

Yearly Fixed Expenses Variable Expenses per Sales $

Cost of merchandise sold $0.600

Selling and promotion expense $210,000 0.082

Building occupancy expense 186,000 0.022

Buying expense 150,000 0.041

Delivery expense 111,000 0.008

Credit and collection expense 72,000 0.0002

Administrative expense 531,000 0.003

Totals $1,260,000 $0.758

Management expected to attain a sales level of $12 million during the current year. At the end of the year, the actual results achieved by the company were as follows.

Net sales $10,500,000

Cost of goods sold 6,180,000

Selling and promotion expense 1,020,000

Building occupancy expense 420,000

Buying expense 594,000

Delivery expense 183,000

Credit and collection expense 90,000

Administrative expense 564,000

Instructions:

1. Prepare a schedule comparing the actual results with flexible budget amounts developed for the actual sales volume of $10,500,000. Organize your schedule as a partial multiple-step income statement, ending with operating income. Include separate columns for (1) flexible budget amounts, (2) actual amounts, and (3) and amount over (under) budget. Use the cost-volume relationships given in the problem to compute the flexible budget amounts.
2. Write a statement evaluating the company's performance in relation to the plan reflected in the flexible budget.

Schedule for Comparison of Flexible and Actual Budgeted Revenues and Expenses

Particulars Flexible Budget Actual Over(under) Budget

Net sales $10,500,000 $10,500,000 0

Less: Costs of goods sold 6,300,000 6,180,000 (120,000)

Gross Profit $4,200,000 $4,320,000 $120,000

Less: Operating Expenses

Selling and promotion expense 1,071,000 1,020,000 (51,000)

Building occupancy expense 417,000 420,000 3,000

Buying expense 580,500 594,000 13,500

Delivery expense 195,000 183,000 (12,000)

Credit and collection expense 93,000 90,000 (3,000)

Administrative expense 562,500 564,000 1,500

Operating Income $1,281,000 $1,449,000 $168,000