Question

Prepare a monthly flexible selling expense budget for Cottonwood Company 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

Answer 1

Answer:

Sales volumes                               $300,000       $350,000      $400,000

Total selling expenses                  $541,500        $595,750      $650,000

Explanation:

Basically, a flexible budget can be described as a budget that adjusts with changes in volume or activity.

Therefore, monthly flexible selling expense budget for Cottonwood Company which adjusts with sales volumes can be prepared as follows:

Cottonwood Company

Monthly Flexible Selling Expense Budget

For the Month .....

Details                                                    $                      $                      $      

Sales volumes                                300,000           350,000      400,000

Variable selling expenses:

Sales comm. (6% of sales)                18,000              21,000           24,000

Shipping exp. (1% of sales)                 3,000               3,500             4,000

Misc. selling exp. (1.5% of sales)        4,500               5,250             6,000

Fixed selling expenses:

Sales manager's salary                  120,000            120,000         120,000

Advertising expense                       90,000             90,000           90,000

Misc. selling expense                        6,000               6,000             6,000  

Total selling expenses                 541,500            595,750        650,000