Question

Speedy Runner makes running shoes and they are anticipating the incurrence of the following operating expenses during the upcoming​ year: Cost Sales commission $ 3 per pair of shoes sold Salaries $ 540 comma 000 Shipping expenses $ 1.50 per pair of shoes sold Bad debt expense ​1.5% of sales revenue Depreciation on sales vehicles $ 30 comma 000 Advertising $ 29 comma 500 Speedy Runner plans to sell 125 comma 000 pairs of shoes at​ $100 per pair. What will Speedy Runner budget for cash disbursements related to operating​ expenses?

Answer 1

Speedy Runner will budget a total of $1,132,000 for Cash Disbursements related to operating expenses.

This figure is made up of:

a) Sales Commission of $3 x 125,000 = $375,000

b) Salaries of $540,000

c) Shipping Expenses of $1.50 x 125,000 = $187,500 and

d) Advertising cost of $29,500

Step-by-step explanation:

Bad debts and Depreciation expenses are not cash disbursements. As such, they are not taken into account in arriving at the Operating Expenses cash disbursement.