Question

XYZ Company showed a 10% increase in sales over the initial budget. Where might they see increases in expense due to this hike in sales?

A) Sales commissions, utilities and supplies

B) Insurance, rent and administrative payroll

C) Rent, utilities and executive salaries

Answer 1

A) Sales commissions, utilities and supplies

XYZ Company might see increase in Sales Commission, Utilities and supplies expense due to increase in sales. Since, these are cost related to sales.

Insurance, rent and administrative payroll are period cost and these will not directly related with sales; therefore, these will not increase with increase in sales. Similarly Rent, utilities and executive salaries are also period cost and will not increase with the increase in sales.

Hence, correct answer is A) Sales commissions, utilities and supplies.