question archive World-Tec Company sells electronics over the internet
World-Tec Company sells electronics over the internet
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World-Tec Company sells electronics over the internet. The international division is organized as a cost center. The budget for the international Division for the month ended March 31, 2012, is as follow (in thousands):
Customer service salaries .......... $ 325,000
Insurance and property taxes ............ 68,250
Distribution salaries ............. 519,250
Marketing salaries ............... 612,125
Engineer salaries .............. 498,125
Warehouse wages ............... 348,800
Equipment depreciation ........... 109,400
Total .................. $2,481,450
During the March, the costs incurred in the International Division were as follows:
Customer service salaries .......... $ 416,700
Insurance and property taxes ............ 66,200
Distribution salaries ............. 514,000
Marketing salaries ............... 685,500
Engineer salaries .............. 488,100
Warehouse wages ............... 334,900
Equipment depreciation ........... 109,375
Total .................. $2,614,775
Instruction
1. Prepare a budget performance report for the director of the international division for the month of March
2. For which costs might the director be expected to request supplemental reports?
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1.
WORLD-TEC COMPANY
Budget Performance Report x Director, International Division
For the Month Ended March 31, 2012
Over Under
Budget Actual Budget Budget
Customer service salaries................... $ 325,500 $ 416,700 $ 91,200 $ x
Insurance and property taxes................ 68,250 66,200 x 2,050
Distribution salaries.................................. 519,250 514,000 x 5,250
Marketing salaries..................................... 612,125 685,500 73,375 x
Engineer salaries................................... 498,125 488,100 x 10,025
Warehouse wages..................................... 348,800 334,900 x 13,900
Equipment depreciation..................... 109,400 109,375 x 25
Total.............................................. $2,481,450 $2,614,775 $164,575 $31,250
2. The customer service and marketing salaries are significantly over budget. The director should investigate the cause of these results. One possibility is that the company is having an increase in sales, requiring greater marketing effort and customer service. However, the warehouse and distribution costs have not shown similar increases. Thus, it’s also possible that marketing and customer service salaries are increasing because of service problems and unplanned efforts to market the company’s service.
