A. A company incurs selling expenses composed of a fixed amount per quarter and

Question

A. A company incurs selling expenses composed of a fixed amount per quarter and a variable commission based on sales volume (shown below). What is the fixed quarterly sales expense and the commission % given only the following data? Please give an explanation.

Sales Selling Expense

Q1 20,000,000 2.050.000

Q2 12.500.000 1,400,000

Q3 22,000,000 2,000,000

Q4 16,000,000 1,000,000

B.If Management decides to increase sales commission by 35% and decrease fixed quarterly selling expenses by 30%, also assuming a 10% growth in sales compared to the prior year, what will next four quarters sales and selling expenses amount to as shown above?

Sales Selling Expense

Q1 ? ?

Q2 ? ?

Q3 ? ?

Q4 ? ?

Explanation / Answer

A Let x be the commission percentage Let y be the Fixed Quarterly sales expenses First quarter selling expenses ,20000000*x+y=2050000 --------------1 second quarter selling expenses,12500000*x+y=1400000 ---------------2 If we subtract,2 from 1 (200000000-12500000)*x+(y-y)=2050000-1400000 7500000x=650000 x=650000/7500000*100 x=8.67% Commission percentage=8.67% If we apply x in equation 1 20000000*8.67%+y=2050000 1734000+y=2050000 y=2050000-1734000 y=316000 Fixed quarterly sales expenses = $ 316000 B Revised sales commission = 8.67%+8.67 *35%=11.70% Revised fixed quarterly selling expenses= $316000-($316000*30%)=$221200 Q1 Revised sales =20000000+(20000000*10%)= $22000000 Selling Expenses= Commission + Fixed quarterly selling expenses Commission= 22000000*11.70%=2574000 Selling expenses= $221200+$2574000=$2795200 Q2 Revised sales =12500000+(12500000*10%)= $13750000 Selling Expenses= Commission + Fixed quarterly selling expenses Commission= $13750000*11.70%=$1608750 Selling expenses= $221200+$1608750=$1829950 Q3 Revised sales =22000000+(22000000*10%)= $24200000 Selling Expenses= Commission + Fixed quarterly selling expenses Commission= $24200000*11.70%=$2831400 Selling expenses= $221200+$2831400=$3052600 Q4 Revised sales =16000000+(16000000*10%)= $17600000 Selling Expenses= Commission + Fixed quarterly selling expenses Commission= $17600000*11.70%=$2059200 Selling expenses= $221200+$2059200=$2280400 Sales ($) Selling expense($) Q1 22000000 2795200 Q2 13750000 1829950 Q3 24200000 3052600 Q4 17600000 2280400

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