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:________.
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:
a. 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.
b. Write a statement evaluating the company’s performance in relation to the plan reflected in the flexiblebudget.