Fallon Company uses flexible budgets to control its selling expenses. Monthly sa

Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $167,300 to $209,300. Variable costs and their percentage relationship to sales are sales commissions 790, advertising 6%, traveling 496, and delivery 196. Fixed selling expenses will consist of sales salaries $34,900, depreciation on delivery equipment $7,100, and insurance on delivery equipment $1,900. Prepare a monthly flexible budget for each $14,000 increment of sales within the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)

Explanation / Answer

Answer:-

FALLON COMPANY Monthly Selling Expense Flexible Budget For the year 2017 Sales range 167300 181300 195300 209300 Variable costs:- Sales commission 7% $167300*7%=11711 $181300*7%=12691 $195300*7%=13671 $209300*7%=14651 Advertising 6% $167300*6%=10038 $181300*6%=10878 $195300*6%=11718 $209300*6%=12558 Travelling 4% $167300*4%=6692 $181300*4%=7252 $195300*4%=7812 $209300*4%=8372 Delivery 1% $167300*1%=1673 $181300*1%=1813 $195300*7%=13671 $209300*%=2093 Total Variable costs (a) 30114 32634 46872 37674 Fixed costs:- Sales salaries 34900 34900 34900 34900 Depreciation on delivery equipment 7100 7100 7100 7100 Insurance on delivery equipment 1900 1900 1900 1900 Total Fixed costs (b) 43900 43900 43900 43900 Total Selling expenses cost (c=a+b) 74014 76534 90772 81574

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