Question

Edinburg Company Accounting information for planning and decision-making The Directors of Edinburg Company are planning for the next year (2020). They want to develop a strategic plan based on the capacity and opportunities of their business. The accountant provided the following forecast for 2020: Budgeted operating activities Sales - $ 800,000 Cost of sales (manufacturing costs) Materials 300,000 Labour 110,000 Variable overheads 50,000 Fixed overheads 60,000 $ 520,000 Selling LLL L Commission* 80,000 Variable expenses 60,000 Fixed expenses 20,000 $ 160,000 Administrative Variable expenses 30,000 Fixed expenses 30,000 $ 60,000 $ 740,000 Budgeted profit $ 60,000 Budgeted production Capacity 400,000 units 600,000 units Sales commission is equal to 10% of sales $

Answer 1

As per the policy only 1 question to be answered. Hence answering Question 1 only:

Budgeted Operating Activities	Amount in $
Sales (A) (Note 1)			880000
Cost of Sales (manufaturing costs)
Materials	300000
Labour	110000
Variable Overheads	50000
Fixed Overheads	60000
B		520000
Selling
Commission (Note 2)	88000
Variable expenses	60000
Fixed expenses	20000
Advertisement expenses (Note 3)	70000
C		238000
Administrative
Variable expenses	30000
Fixed expenses	30000
D		60000
Total Expenses (E)			818000
Budgeted Profit (A-E)			62000
Note 1. As selling price increased by 10 % so total sales is 800000 + 10% of 800000 = 880000
Note 2. Since sales commission is 10 % of Sales, as sales revised to 880000. Hence commission is 10% of 880000 = 88000
Note 3. Proposed advertisement expense of $ 70000 is included which was earlier not there.