Question

Digital Solutions Inc. uses flexible budgets that are based on the following data:

Sales commissions	15% of sales
Advertising expense	18% of sales
Miscellaneous administrative expense	$9,000 per month plus 12% of sales
Office salaries expense	$30,000 per month
Customer support expenses	$14,000 per month plus 20% of sales
Research and development expense	$30,000 per month

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

Digital Solutions Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending October 31
Total sales	$400,000	$500,000	$600,000
Variable cost:
	$	$	$
Total variable cost	$	$	$
Fixed cost:
	$	$	$
Total fixed cost	$	$	$
Total selling and administrative expenses	$	$	$

Answer 1

Flexible Selling & Administrative Expenses Budget for the month of October 31
EXHIBIT 5 - FORMAT
Particulars	Amount ($)	Amount ($)	Amount ($)
Sales	4,00,000	5,00,000	6,00,000
Variable Costs:
Sales commissions (@15% on sales)	60,000	75,000	90,000
Advertising expense (@18% on sales)	72,000	90,000	1,08,000
Miscellaneous administrative expense (@12% on sales)	48,000	60,000	72,000
Customer support expenses (@20% sales)	80,000	1,00,000	1,20,000
Total variable cost	2,60,000	3,25,000	3,90,000
Fixed cost:
Miscellaneous administrative expense	9,000	9,000	9,000
Office salaries expense	30,000	30,000	30,000
Customer support expenses	14,000	14,000	14,000
Research and development expense	30,000	30,000	30,000
Total fixed cost	83,000	83,000	83,000
Total selling and administrative expenses	3,43,000	4,08,000	4,73,000