Question

Cloud Productivity Inc. uses flexible budgets that are based on the following data:

Sales commissions	15% of sales
Advertising expense	18% of sales
Miscellaneous administrative expense	$5,500 per month plus 12% of sales
Office salaries expense	$30,000 per month
Customer support expenses	$13,000 per month plus 20% of sales
Research and development expense	$30,000 per month

Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)

Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales	$400000	$500000	$600000
Variable cost:
	$	$	$
Total variable cost	$	$	$
Fixed cost:
	$	$	$
Total fixed cost	$	$	$
Total selling and administrative expenses	$	$	$

Please show work for each step.

Answer 1

Particulars		Volume
Sales		$          400,000.00	$           500,000.00	$       600,000.00
Variable cost:
Sales commission		$             60,000.00	$              75,000.00	$         90,000.00
		(15% of $ 400000)	( 15% of $ 500000)	(15% of 600000)
Advertisement		$             72,000.00	$              90,000.00	$       108,000.00
		(18% of $ 400000)	( 18% of $ 500000)	(18% of 600000)
Misc. admin. Exp.		$             48,000.00	$              60,000.00	$         72,000.00
(Variable part)		(12% of $ 400000)	( 12% of $ 500000)	(12% of 600000)
Customer Support		$             80,000.00	$           100,000.00	$       120,000.00
(Variable part)		(20% of $ 400000)	( 20% of $ 500000)	(20% of 600000)
Total variable Cost		$          260,000.00	$           325,000.00	$       390,000.00
Fixed cost:
Misc. admin. Exp.		$               5,500.00	$                5,500.00	$            5,500.00
(Fixed part)
Office salaries exp.		$             30,000.00	$              30,000.00	$         30,000.00
Customer Support		$             13,000.00	$              13,000.00	$         13,000.00
(Fixed part)
Research and		$             30,000.00	$              30,000.00	$         30,000.00
development Expense
Total Fixed cost		$             78,500.00	$              78,500.00	$         78,500.00
Total Selling and		$          338,500.00	$           403,500.00	$       468,500.00
Adm. Expense