Question

The actual selling expenses incurred in March 2017 by Fallon Company are as follows.

Variable Expenses				Fixed Expenses
Sales commissions		$10,978		Sales salaries		$35,100
Advertising		11,911		Depreciation		7,300
Travel		8,415		Insurance		1,900
Delivery		3,446

(a) Prepare a flexible budget performance report for March, assuming that March sales were $168,300. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 7%, traveling 5%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,100, Depreciation on delivery equipment $7,300, and insurance on delivery equipment $1,900. (List variable costs before fixed costs.)

(b) Prepare a flexible budget performance report, assuming that March sales were $177,000. (List variable costs before fixed costs.)

Answer 1

(a) Flexible Budget for March (value of Sales 168300)
Sales	$ 168,300.00
Less-Variable Cost
Sales Commission	$    10,098.00
Advertising expense	$    11,781.00
Travelling	$      8,415.00
Delivery expense	$      3,366.00
Total Variable Cost	$    33,660.00
Contribution margin	$ 134,640.00
Fixed expenses
Sales salaries	$    35,100.00
Depreciation	$      7,300.00
Insurance	$      1,900.00
Total Fixed Cost	$    44,300.00
Net Income	$    90,340.00

(b) Flexible Budget for March (value of Sales 177000)
Sales	$ 177,000.00
Less-Variable Cost
Sales Commission	$    10,620.00
Advertising expense	$    12,390.00
Travelling	$      8,850.00
Delivery expense	$      3,540.00
Total Variable Cost	$    35,400.00
Contribution margin	$ 141,600.00
Fixed expenses
Sales salaries	$    35,100.00
Depreciation	$      7,300.00
Insurance	$      1,900.00
Total Fixed Cost	$    44,300.00
Net Income	$    97,300.00