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 14% of sales Advertising expense 18% of sales Miscellaneous administrative expense $8,000 per month plus 12% of sales Office salaries expense $28,000 per month Customer support expenses $14,000 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

• All working forms part of the answer
• Workings

Sales	$              400,000	$              500,000	$                 600,000
Variable Costs:
Advertising expense [18% of sales]	$               72,000	$                90,000	$                 108,000
Miscellaneous administrative expenses [12% of sales]	$                48,000	$                60,000	$                   72,000
Customer Support expenses [20% of sales]	$                80,000	$              100,000	$                 120,000

• Requirement:

Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales	$              400,000	$              500,000	$                 600,000
Variable Costs:
Advertising expenses	$                72,000	$                90,000	$                 108,000
Miscellaneous administrative expenses	$                48,000	$                60,000	$                   72,000
Customer Support Expenses	$                80,000	$              100,000	$                 120,000
Total variable Costs	$              200,000	$              250,000	$                 300,000
Fixed Costs:
Miscellaneous administrative expenses	$                   8,000	$                   8,000	$                      8,000
Office Salaries expenses	$                28,000	$                28,000	$                   28,000
Customer Support Expenses	$                14,000	$                14,000	$                   14,000
Research & Development expense	$                30,000	$                30,000	$                   30,000
Total Fixed Cost	$                80,000	$                80,000	$                   80,000
Total selling and administrative expenses	$              280,000	$              330,000	$                 380,000