Estimating Flexible Selling Expense Budget and Computing Variances

question 72

Essay

Estimating flexible selling expense budget and computing variances.Georgia Peaches estimates the following selling expenses next period:

Required:
a.Derive the cost equation (y = a + bx)for selling expenses.(Hint: y = a + bx + cy. )
b.Assume that Georgia actually sells 50,000 units during the period at an average price of $6 per unit.The company had budgeted sales for the period to be: volume,65,000 units;price,$5.50.Calculate the sales price and volume variance.
c.The actual selling expenses incurred during the period were $80,000 fixed and $30,000 variable.Prepare a profit variance analysis for sales revenue and selling expenses.

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Definitions:

Rights Offering

A financial opportunity allowing current shareholders to purchase additional shares directly from the company at a predetermined price, usually at a discount to the market price.

Subscription Price

The price at which existing shareholders are allowed to buy additional shares of a company's stock in a rights issue, usually at a discount to the current market price.

Market Price

The market rate at which a service or asset can currently be purchased or sold.

Underwriting Spread

The underwriting spread refers to the difference between the price an underwriter pays to the issuer of a security and the price at which it sells the security to investors.