Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $167,400 to $201,300. Variable costs and their percentage relationship to sales are sales commissions 8%, advertising 4%, traveling 4%, and delivery 1%. Fixed selling expenses will consist of sales salaries $34,900, depreciation on delivery equipment $7,400, and insurance on delivery equipment $1,500. Prepare a monthly flexible budget for each $11,300 increment of sales within the relevant range for the year ending December 31, 2017

Answer 1

SOLUTION

Fallon Company

Monthly Selling Expense Flexible Budget

For the Year 2017

	Amount ($)	Amount ($)	Amount ($)	Amount ($)
Activity Level (Sales)	167,400	178,700	190,000	201,300
Variable expenses:
Sales commissions (8%)	13,392	14,296	15,200	16,104
Advertising (4%)	6,696	7,148	7,600	8,052
Traveling (4%)	6,696	7,148	7,600	8,052
Delivery (1%)	1,674	1,787	1,900	2,013
Total Variable Exp (17%) (A)	28,458	30,379	32,300	34,221
Fixed expenses:
Sales salaries	34,900	34,900	34,900	34,900
Depreciation	7,400	7,400	7,400	7,400
Insurance	1,500	1,500	1,500	1,500
Total Fixed Expenses (B)	43,800	43,800	43,800	43,800
Total Expenses (A+B)	72,258	74,179	76,100	78,021