Exercise 22-5 Fallon Company uses flexible budgets to control its selling expens

Question

Exercise 22-5 Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $173,900 to $210,200. Variable costs and their percentage relationship to sales are sales commissions 796, advertising 4%, traveling 4%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,500 depreciation on delivery equipment $7,300, and insurance on delivery equipment $2,000. Prepare a monthly flexible budget for each $12,100 increment of sales within the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)

Explanation / Answer

FALLON COMPANY Monthly Selling Expense Flexible Budget For the Year 2017 Sales $1,73,900 $1,86,000 $1,98,100 $2,10,200 Less: variable selling expenses Sales commission $12,173 $13,020 $13,867 $14,714 Advertising $6,956 $7,440 $7,924 $8,408 Travelling $6,956 $7,440 $7,924 $8,408 Delivery $3,478 $3,720 $3,962 $4,204 Total variable selling expenses $29,563 $31,620 $33,677 $35,734 Less:fixed selling expenses Salaries $35,500 $35,500 $35,500 $35,500 Depreciation $7,300 $7,300 $7,300 $7,300 Insurance $2,000 $2,000 $2,000 $2,000 Total fixed selling expenses $44,800 $44,800 $44,800 $44,800 Net income $99,537 $1,09,580 $1,19,623 $1,29,666

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