Four Flags is a retail department store on January 1 2017 Fo

Four Flags is a retail department store. on January 1, 2017, Four Flags\' accountants used the following data to develop the master budget for Four Flags for 2017: Cost Cost of Goods 5old Selling and Promotion Expense Building Occupancy Expense Buying Expense Delivery Expense Credit and Collection Expense FIxed $0 $205,000 $185,000 $145,000 $120,000 $74,000 Varlable (per unit sold) $6,40 $0.00 $0.20 $0.40 $0.05 $0.01 Expected unit sales in 2017 were 1,200,000, and 2017 total revenue was expected to be $12,000,000. Actual 2017 unit sales turned out to be 1,100,000, and total revenue was $11,000,000. Actual total costs in 2017 were: Cost of Goods Sold elling and Promotion Expense Building Occuparicy Expense Buying Expense Delivery Expense Credit and Collection Expense $6,000,000 5900,000 $480,000 $690,000 $170,000 $40,000 Required Compute the flexible-budget variances in 2017 for the following two cost items (NOTE: enter favorable variances as positive numbers and unfavorable variances as negative numbers) Delivery Expense Cost of Gaods Sold

Solution

1. Flexible budgeted Delivery expense = fixed cost + variable cost for actual output

=$120000 + $0.05 * 1100000

= $175000

Flexible budget variance for delivery expense = Actual - flexible

= $170000 - $175000

= 5000 F

2. Flexible budgeted cost of goods sold = variable cost for actual output

= $6.4 * 1100000

= $7040000

Flexible budget variance for cost of goods sold = Actual - flexible

= $6000000 - $7040000

= $1040000 F