Gridiron Merchandising anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company used a flexible budget for performance evaluations, Gridiron would report a cost variance of:
A) $6,400U.
B) $6,400F.
C) $9,400U.
D) $9,400F.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

The flexible budget for sales commissions would be based on the actual sales volume: 27,500 units x $6 = $165,000. The actual sales commissions were $171,400, resulting in a cost variance of $171,400 - $165,000 = $6,400 unfavorable (U).

Gridiron Merchandising Anticipated Selling 27,000 Units of a Major Product