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Q5.Duncan Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2014, the following data are available.

1. Sales: 20,000 units quarter 1; 22,000 units quarter 2.

2. Variable costs per dollar of sales: sales commissions 5%, delivery expense 2%, and advertising 4%.

3. Fixed costs per quarter: sales salaries $10,000, office salaries $8,000, depreciation $4,200, insurance $1,500, utilities $800, and repairs expense $500.

4. Unit selling price: $20.

Instructions

Prepare a selling and administrative expense budget by quarters for the first 6 months of 2014.

Answer 1

Solution :

Particulars	Quarters		Six Months
	1	2
Budgeted Sales in Units	20,000	22,000
Variable Expenses :
Sales Commissions	$ 20,000	$ 22,000	$ 42,000
Delivery Expenses	$ 8,000	$ 8,800	$ 16,800
Advertising	$ 16,000	$ 17,600	$ 33,600
Total Variable Cost	$ 44,000	$ 48,400	$ 92,400
Fixed Expenses :
Sales Salaries	$ 10,000	$ 10,000	$ 20,000
Office Salaries	$ 8,000	$ 8,000	$ 16,000
Depreciation	$ 4,200	$ 4,200	$ 8,400
Insurance	$ 1,500	$ 1,500	$ 3,000
Utilities	$ 800	$ 800	$ 1,600
Repair Expenses	$ 500	$ 500	$ 1,000
Total Fixed Expenses	$ 25,000	$ 25,000	$ 50,000
Total Selling and Administrative Expenses	$ 69,000	$ 73,400	$ 142,400

Working :

Budgeted Sales in Units	20,000	22,000
Unit Selling Price	$ 20	$ 20
Sales Value	$ 400,000	$ 440,000
Sales Commission (Sales Value * 5%)	$ 20,000	$ 22,000
Delivery Expenses (Sales Value * 2%)	$ 8,000	$ 8,800
Advertising Expenses (Sales Value * 4%)	$ 16,000	$ 17,600

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