Exercise 22-5 Fallon Company uses flexible budgets to control its selling expens
ID: 2579712 • Letter: E
Question
Exercise 22-5 Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $173,700 to $216,600. Variable costs and their percentage relationship to sales are sales commissions 7%, advertising 4%, traveling 4%, and delivery 1%. Fixed selling expenses will consist of sales salaries $35,400, depreciation on delivery equipment $7,500, and insurance on delivery equipment $1,400. Prepare a monthly flexible budget for each $14,300 increment of sales within the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)
FALLON COMPANY Monthly Selling Expense Flexible Budget For the Year 2017 Variable Expenses Fixed ExpensesExplanation / Answer
Monthly Flexible Selling Expense Budget Activity level Sales 173700 188000 202300 216600 Variable expenses: Sales commissions 12159 13160 14161 15162 Advertising 6948 7520 8092 8664 Traveling 6948 7520 8092 8664 Delivery 1737 1880 2023 2166 Total variable expenses 27792 30080 32368 34656 Fixed expenses: Sales salaries 35400 35400 35400 35400 Depreciation 7500 7500 7500 7500 Insurance 1400 1400 1400 1400 Total fixed expenses 44300 44300 44300 44300 Total costs 72092 74380 76668 78956
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