Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, depreciation on delivery equipment $7,000, and insurance on delivery equipment $1,000. Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for the year ending December 31, 2017

Answer 1

`\left[\begin{array}{ccccc}Sales&170,000&180,000&190,000&200,000\\sales \: commissions&10,200&10,800&11,400&12,000\\advertizing&6,800&7,200&7,600&8,000&traveling&5,100&5,400&5,700&6,000&Total  \: Variable&22,100&23,400&24,700&26,000&Fixed&43,000&43,000&43,000&43,000&Total \: Selling \: expense&65,100&66,400&67,700&69,000&\end{array}\right]`

Step-by-step explanation:

First

we apply the percent rate to each sales level

for example

advertizing for sales 200,000 x 4% = 8,000

Second,

we add them to get total variable

Third,

we add all the fixed cost together

Forth,

and last, we calculate the total cost.