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 $170,000 to $200,000. Variable costs and their percentage relationship to sales are: Sales Commissions 6%, Advertising 4%, Traveling 3%, and Delivery 2%. Fixed selling expenses will consist of Sales Salaries $35,000, Depreciation on Delivery Equipment $7,000, and Insurance on Delivery Equipment $1,000. Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for the year ending December 31, 2014. (List variable costs before fixed costs.)

Explanation / Answer

Flexible Budget A) Sales in $ 170,000 180,000 190,000 200,000 B) Variable Expenses: i Sales Commission (6% of sales) 10,200 10,800 11,400 12,000 ii Advertising (4% of Sales) 6,800 7,200 7,600 8,000 iii Traveling (3% of Sales) 5,100 5,400 5,700 6,000 iv Delivery (2% of Sales) 3,400 3,600 3,800 4,000 C) Fixed Expenses i Salaries 35,000 35,000 35,000 35,000 ii Depreciation on Delivery Equipment 7,000 7,000 7,000 7,000 iii Insurance on Delivery Equipment 1000 1,000 1,000 1,000 D) Total Expenses 68,500 70,000 71,500 73,000 E) Profit ( Item A - D) 101,500 110,000 118,500 127,000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.