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 $167,400 to $199,200. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, traveling 4%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,022, depreciation on delivery equipment $6,754, and insurance on delivery equipment $1,938. Prepare a monthly flexible budget for each $10,600 increment of sales within the relevant range for the year ending December 31, 2014. (List variable costs before fixed costs.)

Explanation / Answer

Answer:

Dewitt Company Flexible budget Activity level: Sales 167400 178000 188600 199200 Variable expenses: Sales commissions 10044 10680 11316 11952 Advertising 6696 7120 7544 7968 Travelling 6696 7120 7544 7968 Delivery 3348 3560 3772 3984 Total variable expenses 26784 28480 30176 31872 Fixed expenses: Sales Salaries 35022 35022 35022 35022 Depreciation 6754 6754 6754 6754 Insurance on delivery equipment 1938 1938 1938 1938 Total fixed expenses 43714 43714 43714 43714 Total expenses 70498 72194 73890 75586

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