Question

Salary expense was 15.5% of sales this year. If sales this year are $1,300,000 and are forecasted to be $1,500,000 next year, what is forecasted salary expense next year if all expenses maintain a constant percent of sales?

Answer 1

Salary expense next year=$232,500

Step-by-step explanation:

The ratio of expense to ales is an important which helps in the management and control overhead.

We can be predict the Salary expense using the information given about the relationship between salary expense and sales .

If salary expense is 15.5% of sales, then Salary expense this year =

15.5% × 1,300,000=$201,500

Salary expense next year = 15.5% × foretasted sales next year

= 15.5% × 1,500,000 = $232,500

We use 15.5% because the relationship between the expenses and the sales in proportion is expected to remain the same

Salary expense next year=$232,500