Shep Company combines its operating expenses for budget purposes in a selling an

Question

Shep Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first quarter of 2016, the following data are developed:

Prepare a selling and administrative expense budget for the first quarter of 2016. (List variable costs before fixed costs.)

1. Sales: 20,000 units; unit selling price: $30 2. Variable costs per dollar of sales: Sales commissions 6% Delivery expense 2% Advertising 4% 3. Fixed costs per quarter: Sales salaries $24,000 Office salaries 19,000 Depreciation 6,000 Insurance 2,000 Utilities 1,000 SHEP COMPANY Selling and Administrative Expense Budget For the Quarter Ended March 31, 2016

Explanation / Answer

Selling and Administration Expense Budget Variable expense Sales commission (20,000*30*6%) 36000 Delivery expense (20,000*30*2%) 12000 Advertising (20,000*30*4%) 24000 total variable expense 72000 fixed expense Sales salaries 24,000 office salaries 19,000 Depreciation 6,000 insurance 2,000 Utilities 1,000 total fixed expense 52,000 total selling and administration expense 124,000

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