Help Warshaw Company budgets payroll ar $3,600 per month plus a percentage of mo

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Warshaw Company budgets payroll ar $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July ar budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July. The total operating expenses budgeted for July are $25,500. $23,900. $14,800. 14,400.

Explanation / Answer

Hi,

Please find the answer as follows;

Payroll Expense % = (13200 - 3600)/160000*100 = 6%

Payroll Expense for July = 3600 + 180000*.06 = 14400

Total Operating Expense = 1000 (Depreciation) + 600 (Insurance) +10%*95000 (Office and Adminsi. Expense) + 14400 Payroll) = 25500

Answer is Option A (25500)

Thanks.

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