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 $7,000 per month plus 12% of sales
Office salaries expense $29,000 per month
Customer support expenses $13,000 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.
Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31, 2016
Total sales $400,000 $500,000 $600,000
Variable cost:
Sales commissions
Advertising expense
Miscellaneous administrative expense
Customer support expense
Total variable cost
Fixed cost:
Miscellaneous administrative expense
Office salaries expense
Customer support expense
Research and development expense
Total fixed cost
Total selling and administrative expenses

Answer 1

Answer:

Total selling and administrative expenses budget for March are as follows:

For sales volumes of $400,000 = $327,000

For sales volumes of $500,000 = $389,000

For sales volumes of $600,000 = $451,000

Explanation:

Note: See the attached excel file for the flexible selling and administrative expenses budget for March

A flexible budget can be described as a budget that changes with the level or volume of activity of a company.

In this question, sales volume is used as the level of activity and a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000 is prepared in the attached excel file.

Download xlsx