The International Company makes and sells only one product, Product SW. The comp

Question

The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. the following budget data are available:
variable cost per unit sold monthly fixed cost
sales commissions $0.7
shipping $1.1
advertising $0.2 $14,000
executive salaries - $34,000
depreciation on office equipment - $11,000
other $0.25 $19,000

all expenses other than depreciation are paid in cash in the month they are incurred.

1. if the company has budgeted to sell 25,000 units of product SW in july, how much cash is expected to be spent based on the total budgeted selling and administrative expenses for july?

2. if the company has budgeted to sell 20,000 units of product SW in october then the total budgeted variable selling and administrative expenses for october will be?

Explanation / Answer

#1. The total variable cost would be (.7+1.1+.2+.25)*25000 units= $56250 Fixed cost would be 14000+34000+19000=67000. Depreciation isn't counted here because it is not paid in cash so the answer is 56250+67000= $123,250 #2. The variable cost portion should stay the same here other than decreasing units sold, but the fixed cost is now only going to be executive salaries. So the answer is (.7+1.1+.2+.25)*20000=45000+34000= $79,000

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