Question

Flexible Budget for Selling and Administrative Expenses for a Service Company Morningside Technologies Inc. uses flexible...



Flexible Budget for Selling and Administrative Expenses for a Service Company

Morningside Technologies Inc. uses flexible budgets that are based on the following data:

Sales commissions

9% of sales

Advertising expense

25% of sales

Miscellaneous administrative expense

$1,700 per month plus 3% of sales

Office salaries expense

$16,000 per month

Customer support expenses

$2,350 plus 4% of sales

Research and development expense

5,250 per month


Prepare a flexible selling and administrative expenses budget for April for sales volumes of $105,000, $130,000, and $160,000.


_______________________________________________________________________________________________

Lorenzo’s Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12'' and 16'' frozen pizzas for September:

Units


12" Pizza

16" Pizza

Budgeted production volume

12,900


20,500







Three direct materials are used in producing the two types of pizza. The quantities of direct materials expected to be used for each pizza are as follows:


12" Pizza

16" Pizza

Direct materials:


Dough

0.80

lb. per unit

1.50

lb. per unit


Tomato

0.50


0.70



Cheese

0.70


1.30


In addition, Lorenzo’s has determined the following information about each material:


Dough

Tomato

Cheese

Estimated inventory, September 1

550

lb.

220

lb.

320

lb.

Desired inventory, September 30

580

lb.

210

lb.

350

lb.

Price per pound

$1.20


$2.10


$3.40


Prepare September's direct materials purchases budget for Lorenzo’s Frozen Pizza Inc. When required, enter unit prices to the nearest cent.


__________________________________________________________________________________

Wilmington Chemical Company uses oil to produce two types of plastic products, P1 and P2. Wilmington budgeted 24,200 barrels of oil for purchase in June for $58 per barrel. Direct labor budgeted in the chemical process was $154,400 for June. Factory overhead was budgeted $252,600 during June. The inventories on June 1 were estimated to be:

Oil

$10,800

P1

7,300

P2

6,200

Work in process

9,000

The desired inventories on June 30 were:

Oil

$11,900

P1

6,600

P2

5,900

Work in process

9,300


Use the preceding information to prepare a cost of goods sold budget for June.


Homework Answers

Answer #1

Question (1)Solution: selling and administrative budget for April at different sales volume:

Total sales $105,000 $130,000 $160,000
Variable expenses:
Sales commission exp. $9,450 $11,700 $14,400
Miscellaneous administrative exp. 26,250 32,500 40,000
Advertising expense 3,150 3,900 4,800
Customer support exp. 4,200 5,200 6,400
Total variable exp. $43,050 $53,300 $65,600
Fixed expenses:
Miscellaneous administrative exp. $1,700 $1,700 $1,700
Customer support exp. 2,350 2,350 2,350
Office salaries exp. 16,000 16,000 16,000
Total fixed exp. $20,050 $20,050 $20,050
Total selling and administrative expenses $63,100 $73,350 $85,650
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