DeWitt Company uses flexible budgets to control its selling expenses. Monthly Sa

Question

DeWitt Company uses flexible budgets to control its selling expenses. Monthly Sales are expected to range from 169600 to 208000. Variable costs and their percentage relationships to sales are : Sales Commissions 7%, Advertising 6%, Travelling 4%, and Delivery 2%. Fixed selling expenses will consist of Sales Salaries 34803, Depreciation on Delivery Equipment 6743 and Insurance on Delivery Equipment 1741    Prepare a monthly flexible budget for each 12800 increment of sales within the relevant range for the year ending december 31 2014

Explanation / Answer

DeWitt Company Flexible Budget For the Year ending Dec 31, 2014 Sales $169,600 $182,400 $195,200 $208,000 Less: Variable Expenses Sales Commision (7% of Sales)            11,872             12,768        13,664             14,560 Advertising (6% of Sales)            10,176             10,944        11,712             12,480 Travelling (4% of Sales)              6,784               7,296          7,808               8,320 Delivery (2% of Sales)              3,392               3,648          3,904               4,160 Total Variable Expenses            32,224             34,656        37,088             39,520 Contribution $137,376 $147,744 $158,112 $168,480 Less: Fixed Costs Sales Salaries            34,803             34,803        34,803             34,803 Dep. On Delivery Equipment              6,743               6,743          6,743               6,743 Insurance on delivery Equipment              1,741               1,741          1,741               1,741 Total Fixed Expenses            43,287             43,287        43,287             43,287 Net Income $94,089 $104,457 $114,825 $125,193

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