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g Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are: Sales commissions 5% Advertising 4% Traveling 7% Delivery 1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February, 2019, by Cadiz are as follows: Sales commissions $17,200 Advertising 12,000 Traveling 23,700 Delivery 2,400 Fixed selling expenses consist of sales salaries $41,500 and depreciation on delivery equipment $10,000. Prepare a flexible budget performance report, assuming that February sales were $330,000.

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Answer:

Flexible budget performance report - February

Sales                                                                                      $330,000

Less Costs

Sales commissions (5% × $330,000)            $16,500

Advertising (4% × $330,000)                         $13,200

Traveling (7% × $330,000)                             $23,100

Delivery (1% × $330,000)                                 $3,300

Fixed selling expenses :

Sales salaries                                                 $40,000

Depreciation on delivery equipment            $10,000       ($106,100)

Net Income / (Loss)                                                              $223,900

Explanation:

A flexed budged is a Planned Budget that has been adjusted to the Actual activity levels.

The Actual Activity levels of $330,000 Sales are used in preparation of the flexible budget performance report.

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