PROBLEM $23\mathrm{.}7$A

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 Dollar

Cost of merchandise sold $$ $$0\mathrm{.}600$

Selling and promotion expense $$210,0000\mathrm{.}082$

Building occupancy expense $186,0000\mathrm{.}022$

Buying expense $150,0000\mathrm{.}041$

Delivery expense $111,0000\mathrm{.}008$

Credit and collection expense $72,0000\mathrm{.}002$

Administrative expense $531,0000\mathrm{.}003$

Totals $$1,260,000$ $$0\mathrm{.}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

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 $(3)$ any amount over $($under$)$ budget. Use the cost$-$volume relationships given in the problem to compute the flexible budget amounts.

page $1037$Write a statement evaluating the company$$s performance in relation to the plan reflected in the flexible budget.