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	14% of sales
Advertising expense	18% of sales
Miscellaneous administrative expense	$6,500 per month plus 12% of sales
Office salaries expense	$30,000 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:
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

Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales	$400,000	$500,000	$600,000
Variable cost:
Sales commissions	$56,000	$70,000	$84,000
Advertising expense	$72,000	$90,000	$108,000
Miscellaneous administrative expense	$48,000	$60,000	$72,000
Customer support expenses	$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	30000	30000	30000
Customer support expenses	12000	12000	12000
Research and development expense	32000	32000	32000
Total fixed cost	80500	80500	80500
Total selling and administrative expenses	$336,500	$400,500	$464,500