Question

ELT Corporation, which makes only one product, Yester, has the following information available for the coming year. ELT expects sales to be 27,000 units at $32 per unit. The current inventory of Yester is 3,500 units. ELT wants an ending inventory of 4,200 units. Each unit of Yester takes two units of component K. Component K is estimated to cost $9 per unit. Current inventory of K is 3,900 units. ELT wants 5,800 units of K on hand at the end of the next year.
If ELT pays its sales staff commission of 5% of sales. How much will be recorded on the marketing budget for sales commissions for the next period?

A. $864,000

B. $86,400

C. $43,200

D. $27,000

Answer 1

Solution:

Given data,

ELT expects sales to be 27,000 units at $32 per unit.

The current inventory of Yester is 3,500 units.

ELT wants an ending inventory of 4,200 units.

Each unit of Yester takes two units of component K.

Component K is estimated to cost $9 per unit.

Current inventory of K is 3,900 units.

ELT wants 5,800 units of K on hand at the end of the next year.

From the given data we need to find the marketing budget for sales commissions for the next period.

Now we calculate the marketing budget for sales commissions for the next period:

The marketing budget for sales commissions for the next period :

Budgeted sales = No. of budgeted sales unit * sales price per unit

= 27,000 * $ 32

Budgeted sales = $ 864,000

Budgeted sales commission = Budgeted sales * 5 %

= $ 864,000 * 5%

Budgeted sales commission = $ 43,200

Therefore option (c). $ 43,200 is correct answer

Budgeted sales commission for the next period

$ 43,200