Question

The following information is available for Pioneer Company:

Sales price per unit is $100. November and December, sales were budgeted at 2,920 and 3,510 units, respectively. Variable costs are 11 percent of sales (6 percent commission, 3 percent advertising, 2 percent shipping). Fixed costs per month are sales salaries, $5,300; office salaries, $2,700; depreciation, $2,900; building rent, $4,000; insurance, $1,500; and utilities, $700..
Required:
Determine Pioneer's budgeted selling and administrative expenses for November and December.

Answer 1

Pioneer Company's budgeted selling and administrative expenses for November is $49,252 and for December is $55,710.

Step-by-step explanation:

To calculate Pioneer Company's budgeted selling and administrative expenses for November and December, we need to determine the fixed and variable components of these expenses. The fixed costs include sales salaries, office salaries, depreciation, building rent, insurance, and utilities. The variable costs are 11% of sales, which includes commissions, advertising, and shipping.

In November, the sales were budgeted at 2,920 units, so the budgeted variable costs would be -

$100 x 2,920 x 11% = $32,152.

The fixed costs for November are $5,300 + $2,700 + $2,900 + $4,000 + $1,500 + $700 = $17,100.

Therefore, the budgeted selling and administrative expenses for November would be $32,152 + $17,100 = $49,252.

In December, the sales were budgeted at 3,510 units, so the budgeted variable costs would be -

$100 x 3,510 x 11% = $38,610.

The fixed costs for December are the same as in November, $17,100.

Therefore, the budgeted selling and administrative expenses for December would be $38,610 + $17,100 = $55,710.