Terrible Two\'s Inc. combines its operating expenses for budget purposes in a se
ID: 2497200 • Letter: T
Question
Terrible Two's Inc. combines its operating expenses for budget purposes in a selling and administrative expenses budget. For the last six months of 2016, the following data are available:
1. Sales: 33,000 units in Quarter 3; 53000 units in quarter 4,
2. Variable costs per dollar of sales; sales comissions 2.75% ; delivery expenses 3.50%; and advertising 4.25%.
3. Fixed costs per quarter; sales salaries $15500; office salaries $3750; depreciation $4200; insurance $2300; utilities $700, and repairs $140.
4. Unit selling; $26.50.
Required: Prepare a selling and adminstrative expenses budget by quarter for the last six months of 2016
Explanation / Answer
Terrible Two's Inc. Selling and Administrative Expense Budget For the last Six Months of 2016 Quarter Six months 3 4 Budgeted sales in units 33,000 53,000 Variable expenses (working note 1) : Sales Commission $ 24,048.75 $ 38,623.75 $ 62,672.50 Delivery Expenses 30,607.50 49,157.50 79,765.00 Advertising 37,166.25 59,691.25 96,857.50 Total Variable expenses $ 91,822.50 $ 1,47,472.50 $ 2,39,295.00 Fixed Expenses Sales salaries $ 15,500.00 $ 15,500.00 $ 31,000.00 Office salaries 3,750.00 3,750.00 7,500.00 Depreciation 4,200.00 4,200.00 8,400.00 Insurance 2,300.00 2,300.00 4,600.00 utilities 700.00 700.00 1,400.00 Repairs 140.00 140.00 280.00 Total Fixed Expenses $ 26,590.00 $ 26,590.00 $ 53,180.00 Total Selling and Administrative expenses $ 1,18,412.50 $ 1,74,062.50 $ 2,92,475.00 working note: Sales commission Quarter 3 (33000 units x $ 26.5 x 2.75%) 24,048.75 Quarter 4 (53000 x $ 26.5 x 2.75%) 38,623.75
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