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 14% of sales Advertising expense 18% of sales Miscellaneous administrative expense $6,500 per month plus 12% of sales Office salaries expense $28,000 per month Customer support expenses $12,000 per month plus 20% of sales Research and development expense $30,000 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.)

Answer 1

Selling and administrative expenses budget for March

Sales Volume $400,000 $500,000 $600,000

Sales commissions at 14 % $56,000 $70,000 $84,000

Advertising expense at 18% $72,000 $90,000 $108,000

Miscellaneous at $6,500 + 12% $54,500 $66,500 $78,500

Office salaries at $28,000 $28,000 $28,000

Customer support at $12,000 + 20% $92,000 $112,000 $132,000

Research and development at $30,000 $30,000 $30,000

Total $332,500 $396,500 $460,500

Step-by-step explanation:

A flexible is a budget that is adjusted to the actual activity. Thus, adjust the costs items to the appropriate Sales Volumes.