Question

Flexible Budget for Selling and Administrative Expenses for a Service Company Digital Solutions Inc. uses flexible budgets that are based on the following data:
Sales commissions 14% of sales
Advertising expense 20% of sales
Miscellaneous administrative expense $6,000 per month plus 12% of sales
Office salaries expense $29,000 per month
Customer support expenses $14,000 per month plus 20% of sales
Research and development expense $32,000 per month

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

Answer 1

Answer:

Flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000

                                                                 $400,000,   $500,000,  $600,000

Sales commissions                                    $56,000       $70,000     $84,000

Advertising expense                                  $80,000     $100,000   $120,000

Miscellaneous administrative expense    $54,000       $66,000     $78,000

Office salaries expense                             $29,000      $29,000     $29,000

Customer support expenses                     $94,000      $114,000    $134,000

Research and development expense      $32,000       $32,000     $32,000

Total Expense                                          $345,000       $411,000    $477,000

Explanation:

A Flexible Budget is a Master Budget that has been adjusted to the Actual level of Activity instead of estimated level of Activity.