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Dunham Company: Prepare a Corrected Flexible Budget for Shawn

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As a sales manager, Shawn Keyser was given the following static budget report for selling expenses in the clothing department of Dunham Company for the month October.

As a result of this budget report, Shawn was called in the President's office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his cost for getting out of control. Shawn knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice.

A. Prepare a budget report based on a flexible data to help Shawn.
B. Should Shawn have been reprimanded? Explain.

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This solution prepares a corrected flexible budget for Dunham Company.

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Solution to your problem is provided in excel file attached herewith.

Answers to your questions of conceptual aspects are produced herewith and the same is again provided in the word document attached.

The static budget is the budget that is based on this projected level of output, prior to the start of the period. It is the "original" budget. The static budget variance is the difference between any line-item in this original budget and the corresponding line-item from the statement of actual results.

1) Static budget does not ...

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