Question

The Cottonwood Company manufactures mattresses and has for sales volumes of $300,000, $350,000, and $400,000, based on the following data:

Sales commissions	6% of sales
Sales manager's salary	$120,000 per month
Advertising expense	$90,000 per month
Shipping expense	1% of sales
Miscellaneous selling expense	$6,000 per month plus 1.5% of sales

Required:

Prepare a monthly flexible selling expense budget for Cottonwood Company for December, 2016. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.

Answer 1

COTTONWOOD COMPANY
Monthly Selling Expense Flexible Budget
For the month of Dec-2016
Total sales	$300,000	$350,000	$400,000
Variable cost:
Sales commissions	$18,000	$21,000	$24,000
Shipping expenses	$3,000	$3,500	$4,000
Variable Misc selling expense (1.5% of sales)	$4,500	$5,250	$6,000
Total variable costs	$25,500	$29,750	$34,000
Fixed cost:
Sales manager's salary	$120,000	$120,000	$120,000
Advertising	$90,000	$90,000	$90,000
Fixed misc selling expenses	$6,000	$6,000	$6,000
Total fixed costs	$216,000	$216,000	$216,000
Total selling expenses	$241,500	$245,750	$250,000
*Calculations of Variable costs:
Total sales	$300,000	$350,000	$400,000
Variable cost:
Sales commissions	300,000*6%	350,000*6%	400,000*6%
Shipping expenses	300,000*1%	350,000*1%	400,000*1%
Variable misc selling expenses	300,000*1.5%	350,000*1.5%	400,000*1.5%
*Fixed costs remain constant on each level of sales.
*Total selling expenses = Total variable cost + Total fixed cost