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	15% of sales
Advertising expense	18% of sales
Miscellaneous administrative expense	$6,000 per month plus 12% of sales
Office salaries expense	$30,000 per month
Customer support expenses	$13,000 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

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	$60000	$75000	$90000
Advertising expense	72000	90000	108000
Miscellaneous administrative expense	48000	60000	72000
Customer support expenses	80000	100000	120000
Total variable cost	$260000	$325000	$390000
Fixed cost:
Miscellaneous administrative expense	$6000	$6000	$6000
Office salaries expense	30000	30000	30000
Customer support expenses	13000	13000	13000
Research and development expense	32000	32000	32000
Total fixed cost	$81000	$81000	$81000
Total selling and administrative expenses	$341000	$406000	$471000