Question

Warshaw Company budgets payroll at? $4,000 per month plus a percentage of monthly sales. The June operating expenses budget includes total payroll of? $10,400 with budgeted sales of? $160,000. Sales for July are budgeted at? $110,000 while purchases of inventory for July are budgeted at? $60,000. Depreciation and insurance for July are estimated at? $1,200 and? $700, respectively. Office and administrative expenses related to purchasing inventory are budgeted at? 15% of purchases for the month. The purchase of? $2,000 in equipment and? $1,700 in furniture is expected in July.

The total operating expenses budgeted for July are

A.

?$19,300

B.

?$17,400

C.

?$8,400

D.

?$12,300

Answer 1

Budgeted Operating Expense for July:
Estimated Payroll Expense:
Fixed	4000
4% of Sales	4400	(Refer Working Below)
Payroll Expenses	8400
Depreciation	1200
Insurance	700
Office & Admin Expense	9000	(15% of Purchases i.e 60000)
Total Budgeted Operating Expense	19300
Answer is A $19300/-
Working Note for Payroll:
Total Payroll for June	10400
Less: Fixed Portion	4000
Net % of Sale portion	6400
Budgted Sales	160000
% of Sales	4.00%	Percentage of Sales