Question

The Mason Company produces and expects to sell 10,600 units of its product. Variable selling and administrative expense is $3.70 per unit sold and fixed selling and administrative expense is $50,000 per month. Included in the $50,000 fixed selling and administrative expense is a depreciation of $20,000. The budgeted selling and administrative cash payments for November is:

$69,220.

$39,220.

$39,480.

$89,220.

Answer 1

Answer)

Calculation of Budgeted selling and administrative cash payment for November

	Amount
Variable Selling and Administrative expenses (10,600 units X $ 3.70 per unit)	$        39,220
Add: Fixed Selling and administrative expenses	$        50,000
Total Selling and administrative expenses	$        89,220
Less: Non - cash Selling and administrative expenses (Depreciation)	$        20,000
Budgeted selling and administrative expenses cash payment	$        69,220

Therefore budgeted selling and administrative expense cash payment is $ 69,220.

Note: Depreciation expense being a non-cash item will not involve any cash outflows and thus the same has been excluded while calculating cash payment on account of selling and administrative expenses.