Question

The selling and administrative expense budget of Fenley Corporation is based on the number of units sold, which are budgeted to be 2,500 units in January. The variable selling and administrative expense is $4.40 per unit. The budgeted fixed selling and administrative expense is $35,750 per month, which includes depreciation of $4,000. The remainder of the fixed selling and administrative expense represents current cash flows.

Required:

Prepare the selling and administrative expense budget for January.

(Give the proper answer with theory)

Answer 1

Fenley Corporation

Selling and Administrative Budget

For the Month of January

Particulars	Amount
Variable Selling and Administrative Expenses	11,000
Fixed Selling and Administrative Expenses	35,750
Total Selling and Administrative Expenses	46,750
Less: Depreciation Expense	(4,000)
Cash Disbursement for Selling and Administrative Expenses	42,750

Particulars	Amount
Units Sold	2,500
* Variable Overhead Cost per Unit	4.40
Variable Selling and Administrative Expenses	11,000

The Selling and Administrative Budget has been divided in two half one upto Total Selling and Administrative Expenses which is to be used for finding the Budgeted Total Overhead to be reported on the Income Statement of the Company whereas the cash Disbursement for Selling and Administrative Overhead helps to understand how much of the cash is.paid for those Overhead becuse it also includes elements like depreciation which are non cash expense and has nothing to do with the cash Budget so the budget serves different accounting purposes