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Flexible Budget for Selling and Administrative Expenses for a Service Company Digital Solutions Inc. uses flexible...

Flexible Budget for Selling and Administrative Expenses for a Service Company

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

Sales commissions 14% of sales
Advertising expense 18% of sales
Miscellaneous administrative expense $8,000 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 $31,000 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 $ $ $

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Solution:

Digital Solutions Inc.
Flexible Selling and administrative expenses Budget
For the month ending October 31
Total Sales $400,000.00 $500,000.00 $600,000.00
Variable costs:
Sales commissions $56,000.00 $70,000.00 $84,000.00
Advertising expense $72,000.00 $90,000.00 $108,000.00
Miscellaneous administrative expense $48,000.00 $60,000.00 $72,000.00
Customer support expenses $80,000.00 $100,000.00 $120,000.00
Total variable costs $256,000.00 $320,000.00 $384,000.00
Fixed costs:
Miscellaneous administrative expense $8,000.00 $8,000.00 $8,000.00
Office salaries expense $30,000.00 $30,000.00 $30,000.00
Customer support expenses $13,000.00 $13,000.00 $13,000.00
Research and development expense $31,000.00 $31,000.00 $31,000.00
Total fixed costs $82,000.00 $82,000.00 $82,000.00
Total selling and administrative expenses $338,000.00 $402,000.00 $466,000.00

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