Ben Gordon Enterprises distributes a single product which sells for $25 per unit

Question

Ben Gordon Enterprises distributes a single product which sells for $25 per unit. Ben Gordon pays $15 per unit to buy the product, and a $2 commission for each unit sold. Additionally, Ben Gordon has $150,000 per month in fixed costs, including $20,000 per month in depreciation. It is Ben Gordon's policy to maintain an inventory at the end of each month equal to 30% of the next month's projected cost of sales. Ben Gordon makes all sales on credit and collects them 20% in the month of sale and 80% in the month after sale. All selling and administrative expenses are paid in the month after they are incurred. Purchases are paid 70% in the month of purchase and 30% in the month after purchase. Budgeted monthly sales in units for the first five months of 2008 are as follows:
January 20,000 units
February 24,000 units
March 28,000 units
April 25,000 units
May 19,000 units

Reference: Ref 10-4

What amount will be paid for selling and administrative expense in March?

Explanation / Answer

What amount will be paid for selling and administrative expense in March? Selling and Adminstrative expense = $2 per unit Sale of March = 28,000 units Selling and Administrative expense 28,000 x 2 = $56,000

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