Question

Flexible Budget for Selling and Administrative Expenses for a Service Company Digital Solutions Inc. uses flexible budgets that are based on the following data:

Sales commissions 14% of sales
Advertising expense 20% of sales
Miscellaneous administrative expense $6,000 per month plus 12% of sales
Office salaries expense $29,000 per month
Customer support expenses $14,000 per month plus 20% of sales
Research and development expense $32,000 per month

Required:
Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)

Answer 1

Flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000

$400,000, $500,000, $600,000

Sales commissions $56,000 $70,000 $84,000

Advertising expense $80,000 $100,000 $120,000

Miscellaneous administrative expense $54,000 $66,000 $78,000

Office salaries expense $29,000 $29,000 $29,000

Customer support expenses $94,000 $114,000 $134,000

Research and development expense $32,000 $32,000 $32,000

Total Expense $345,000 $411,000 $477,000

Step-by-step explanation:

A Flexible Budget is a Master Budget that has been adjusted to the Actual level of Activity instead of estimated level of Activity.