During the month of May a company expects to produce 5,000 tables and sell 4,000
ID: 2527920 • Letter: D
Question
During the month of May a company expects to produce 5,000 tables and sell 4,000 tables. Create the operating expense budget for May, using the information shown below. Be sure to include both the total cost and the amount paid for operating expenses.
Credit sales for May: $300,000
Variable costs:
Sales commission expense $6 per unit
Shipping expense $8 per unit
Bad debt expense 2% of credit sales
Fixed costs:
Depreciation $8,000 per month
Salaries $12,000 per month
Rent $3,000 per month
Advertising $4,000 per month
Explanation / Answer
Variable costs: Sales commission expense 24000 =4000*6 Shipping expense 32000 =4000*8 Bad debt expense 6000 =300000*2% Total Variable costs 62000 Fixed costs: Depreciation 8000 Salaries 12000 Rent 3000 Advertising 4000 Total Fixed costs 27000 Total operating expenses 89000 Less: Bad debts expense and depreciation expense 14000 Amount paid for operating expenses 75000
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