During the month of May a company expects to produce 5,000 tables and sell 4,000

Question

During the month of May a company expects to produce 5,000 tables and sell 4,000 tables. Create the operating expense budget for May, using the information shown below. Be sure to include both the total cost and the amount paid for operating expenses.

Credit sales for May: $300,000

Variable costs:

Sales commission expense     $6 per unit

Shipping expense                     $8 per unit

Bad debt expense                    2% of credit sales

Fixed costs:        

Depreciation            $8,000 per month

Salaries                     $12,000 per month

Rent                           $3,000 per month

Advertising               $4,000 per month

Explanation / Answer

Variable costs: Sales commission expense 24000 =4000*6 Shipping expense 32000 =4000*8 Bad debt expense 6000 =300000*2% Total Variable costs 62000 Fixed costs: Depreciation 8000 Salaries        12000 Rent 3000 Advertising 4000 Total Fixed costs 27000 Total operating expenses 89000 Less: Bad debts expense and depreciation expense 14000 Amount paid for operating expenses 75000

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