Question

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

Sales commissions	14% of sales
Advertising expense	18% of sales
Miscellaneous administrative expense	$6,500 per month plus 12% of sales
Office salaries expense	$28,000 per month
Customer support expenses	$14,000 per month plus 20% of sales
Research and development expense	$31,000 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:
Sales commissions	$	$	$
Advertising expense
Miscellaneous administrative expense
Customer support expenses
Total variable cost	$	$	$
Fixed cost:
Miscellaneous administrative expense	$	$	$
Office salaries expense
Customer support expenses
Research and development expense
Total fixed cost	$	$	$
Total selling and administrative expenses	$	$	$

Answer 1

Total sales	$400,000	$500,000	$600,000
variable cost
sales commissions(14%*400,000:500,000:600,000)	56,000	70,000	84,000
advertising expense (18%*400,000:500,000:600,000)	72,000	90,000	108,000
miscellaneous administrative expense(12%*400,000:500,000:600,000)	48,000	60,000	72,000
customer support expenses(20%*400,000:500,000:600,000)	80,000	100,000	120,000
total variable cost	256,000	320,000	384,000
fixed cost:
miscellaneous administrative expense	6500	6500	6500
office salaries expense	28,000	28,000	28,000
customer support expenses	14,000	14,000	14,000
research and development expense	31,000	31,000	31,000
total fixed cost	79,500	79,500	79,500
total selling and administrative expenses	335,500	399,500	463,500