CARDINAL CENTER - FLEXIBLE BUDGETING APPLICATION
Cardinal Center is a retail department store. The following cost-volume relationships were used in developing a flexible budget for he company for the current year:
|
Yearly Fixed Expenses
|
Variable Expenses per Sales Dollar
|
|
Cost of merchandise sold
|
|
$0.600
|
|
Selling and promotion expense
|
$210,000
|
0.082
|
|
Building occupancy expense
|
186,000
|
0.022
|
|
Buying expense
|
150,000
|
0.040
|
|
Delivery expense
|
111,000
|
0.010
|
|
Credit and collection expense
|
72,000
|
0.002
|
|
Administrative expense
|
531,000
|
0.003
|
|
Total
|
$1,260,000
|
$0.759
|
Management expected to attain a sales level of $12 million during the current year. At the end of the year, the actual results achieved were:
|
Net sales
|
10,500,000
|
|
Cost of merchandise 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
|
Required:
Prepare a schedule comparing the actual results with flexible budget amounts developed for the actual sales of $10,500,000. Organize your schedule as a partial income statement, ending with operating income. Compare flexible budget amounts with actual amounts, as well as showing whether items were over (under) budget.