Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $169,900 to $211,000. Variable costs and their percentage relationship to sales are sales commissions 7%, advertising 4%, travel 4%, and delivery 1%. Fixed selling expenses will consist of sales salaries $34,700, depreciation on delivery equipment $7,500, and insurance on delivery equipment $1,900.

Prepare a monthly selling expense flexible budget for each $13,700 increment of sales within the relevant range for the year ending December 31, 2020. (List variable costs before fixed costs.)

Answer 1

Selling expense Flexible budget
Activity level\		1,69,900	1,83,600	1,97,300	2,11,000
Variable cost:
Sales commission @7%	11,893	12,852	13,811	14,770
Advertising @4%		6,796	7,344	7,892	8,440
Travel expense @4%		6,796	7,344	7,892	8,440
Delivery expense @1%		1,699	1,836	1,973	2,110
Total Variable cost		27,184	29,376	31,568	33,760
Fixed cost:
Salaes salaries		34,700	34,700	34,700	34,700
Depreciation expense		7500	7500	7500	7500
Insurance on delivery equip	1900	1900	1900	1900
Total Fixed cost		44100	44100	44100	44100
Budgeted Selling expense	71,284	73,476	75,668	77,860