Question

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	$	$	$

Answer 1

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