question archive Fallon Company uses flexible budgets to control its selling expenses
Fallon Company uses flexible budgets to control its selling expenses
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Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, depreciation on delivery equipment $7,000, and insurance on delivery equipment $1,000. Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for the year ending December 31, 2017
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Answer:
First
we apply the percent rate to each sales level
for example
advertizing for sales 200,000 x 4% = 8,000
Second,
we add them to get total variable
Third,
we add all the fixed cost together
Forth,
and last, we calculate the total cost.
PFA
