Question

Flexible Budget for Selling and Administrative Expenses for a Service Company

Cloud Productivity Inc. uses flexible budgets that are based on the following data:

Sales commissions	15% of sales
Advertising expense	18% of sales
Miscellaneous administrative expense	$6,000 per month plus 12% of sales
Office salaries expense	$29,000 per month
Customer support expenses	$12,000 per month plus 20% of sales
Research and development expense	$32,000 per month

Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)

Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales	$400000	$500000	$600000
Variable cost:
	$	$	$
Total variable cost	$	$	$
Fixed cost:
	$	$	$
Total fixed cost	$	$	$
Total selling and administrative expenses	$	$	$

Answer 1

Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales (a)	$400,000	$500,000	$600,000
Variable cost:
Sales Comission (15% Xa)	$60,000	$75,000	$90,000
Advertising Expense (18% Xa)	$72,000	$90,000	$108,000
Misc Administration Expense (12%Xa)	$48,000	$60,000	$72,000
Customer Support Expense ( 20% Xa)	$80,000	$100,000	$120,000
Total variable cost	$260,000	$325,000	$390,000
Fixed cost:
Misc Adminstration Expense	6000	6000	6000
Office Salaries Expense	29000	29000	29000
Custom Support Expenses	12000	12000	12000
Research & Development Expense	32000	32000	32000
Total fixed cost	79000	79000	79000
Total selling and administrative expenses	$339,000	$404,000	$469,000