Question 28 (5 points)

Saved

The following static and flexible budget report was prepared for the sales manager of ACME Corporation for the first quarter of 2022:

	Static Budget (20,000 units)
	Budget	Actual	Variance
Sales	$ 500,000	$ 475,000	$ 25,000	U
Variable costs:
Commissions (15% of sales)	75,000	75,000	-	-
Advertising (20% of sales)	100,000	100,000	-	-
Travel (10% of sales)	50,000	47,500	2,500	F
	225,000	222,500	2,500	F
Fixed costs:
Sales salaries	120,000	120,000	-	-
Administrative salaries	75,000	75,000	-	-
	195,000	195,000	-	-
Total costs	$ 420,000	$ 417,500	$ 2,500	F

	Flexible Budget (Actual sales 19,000 units)
	Budget	Actual	Variance
Sales	$ 475,000	$ 475,000	$ -	-
Variable costs:
Commissions (15% of sales)	71,250	75,000	3,750	U
Advertising (20% of sales)	95,000	100,000	5,000	U
Travel (10% of sales)	47,500	47,500	-	-
	213,750	222,500	8,750	U
Fixed costs:
Sales salaries	120,000	120,000	-	-
Administrative salaries	75,000	75,000	-	-
	195,000	195,000	-	-
Total costs	$ 408,750	$ 417,500	$ 8,750	U

Required: Assuming the sales manager has control over sales and selling costs, a) Comment on the manager's performance. (3 marks) b) Explain why flexible budgets are useful. (2 mark)