Question

Flexible Budget for Selling and Administrative Expenses for a Service Company

Cloud Productivity 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	$28,000 per month
Customer support expenses	$12,000 per month plus 20% of sales
Research and development expense	$30,000 per month

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

Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales	$400000	$500000	$600000
Variable cost:
	$	$	$
Total variable cost	$	$	$
Fixed cost:
	$	$	$
Total fixed cost	$	$	$
Total selling and administrative expenses	$	$	$

Answer 1

total sales					400,000	500,000	600,000
variable cost:
Sales commission					60000	75000	90000
Advertising expense					72000	90000	108000
miscellaneous administrative expense					48000	60000	72000
customer support expense					80000	100000	120000
total variable cost					260000	325000	390000
Fixed cost:
miscellaneous administrative expense					9,000	9,000	9,000
office salaries expense					28,000	28,000	28,000
customer support expense					12,000	12,000	12,000
Research and Development expense					30,000	30,000	30,000
total fixed cost					79,000	79,000	79,000
total selling and administrative expense					339,000	404,000	469,000