T&P Fashion Shops
T&P Fashion Shops is a new chain that operates 10 stores in major malls throughout the United States. Each store manager is responsible for preparing a flexible budget for the store. T&P headquarters accumulates and analyzes the information for each store and in the aggregate.
Below is the forecast (budgeted income statement) for the Houston store showing the breakdown of fixed and variable expenses in columns two through four. The last column shows the actual results.
T&P Fashions – Houston Store
Breakdown of Expenses (Forecast)ForecastFixedVariableActualRevenues$1,400,000$1,260,000Cost of Sales790,000790,000760,000Gross Profit$610,000$500,000Management182,000154,70027,300182,000Shop assistants258,000154,800103,200262,000Rent23,20018,5604,64022,000Utilities34,80034,80031,000Misc. expenses24,50012,25012,25029,000Total expenses$522,500$526,000Net income$87,500$(26,000)==================
Computations (use Excel)
Memo (use Word)
Write a 4- or 5-paragraph memo to the division manager explaining the flexible budget variances; how to interpret the information and what action, if any to take. Comment on the 5% marketing proposal too. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.
Short Essay (use Word)
Start with an introduction and end with a summary or conclusion. Use headings.
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