Question

Flexible budget for selling and administrative expenses for a service company Social Media Inc. uses flexible budgets that are based on the following data:

Sales commissions ............................................................15% of sales

Advertising expense..........................................................20% of sales

Miscellaneous administrative expenses...........................$7,000 per month plus 10% of sales

Office salaries expense .....................................................$35,000 per month

Customer support expenses.............................................$11,000 per month plus 18% sales

Research and development expense................................$35,000 per month

Prepare a flexible selling and administrative expenses budget for June 2016 for sales volume $400,000, $500,000 and $600,000.

Answer 1

Solution

Flexible Selling and Administrative Expenses Budget
Total sales	$ 400,000	$ 500,000	$ 600,000
Variable cost:
Sales commission	$ 60,000	$ 75,000	$ 90,000
Advertising expenses	$ 80,000	$ 100,000	$ 120,000
Miscellaneous administrative expense	$ 40,000	$ 50,000	$ 60,000
Customer support expenses	$ 72,000	$ 90,000	$ 108,000
Total variable cost	$ 252,000	$ 315,000	$ 378,000
Fixed cost:
Miscellaneous administrative expense	$ 7,000	$ 7,000	$ 7,000
Office salaries expenses	$ 35,000	$ 35,000	$ 35,000
Customer support expenses	$ 11,000	$ 11,000	$ 11,000
Research and development expense	$ 35,000	$ 35,000	$ 35,000
Total fixed cost	$ 88,000	$ 88,000	$ 88,000
Total selling and administrative expenses	$ 340,000	$ 403,000	$ 466,000