Question

ABC Company's budgeted sales for June, July, and August are 12,200, 16,200, and 14,200 units respectively. The following cost behavior patterns are budgeted for ABC Company's operating expenses each month: Fixed costs: salaries, $2,100; rent, $5,100; depreciation, $2,500; advertising, $3,300 Mixed costs: utilities, $3,100 + $0.60 per unit Variable costs per unit sold: sales commissions, $2.10; marketing promotions, $1.10; supplies, $0.80; bad debt expense, $0.30 Required: Prepare ABC Company's operating expense budget for June, July, and August. June July August $ 0 $ 0 $ 0 Variable operating expenses: Sales commissions Marketing promotions Supplies Bad debts expense Utilities Total variable expense Fixed operating expenses: Salaries Rent Depreciation Advertising Utilities Total fixed expense Budgeted operating expense $ $ 0 0 $ $ 0 0 $ $ 0 0

Answer 1

	June	July	August
Variable operating expenses:
Sales commissions	12,200 x 2.10 = 25,620	16,200 x 2.10 = 34,020	14,200 x 2.10 = 29,820
Marketing promotions	12,200 x 1.10 = 13,420	16,200 x 1.10 = 17,820	14,200 x 1.10 = 15,620
Supplies	12,200 x 0.80 = 9,760	16,200 x 0.80 = 12,960	14,200 x 0.80 = 11,360
Bad debt expense	12,200 x 0.30 = 3,660	16,200 x 0.30 = 4,860	14,200 x 0.30 = 4,260
Utilities	12,200 x 0.60 = 7,320	16,200 x 0.60 = 9,720	14,200 x 0.60 = 8,520
Total variable expense	$59,780	$79,380	$69,580
Fixed operating expenses:
Salaries	2,100	2,100	2,100
Rent	5,100	5,100	5,100
Depreciation	2,500	2,500	2,500
Advertising	3,300	3,300	3,300
Utilities	3,100	3,100	3,100
Total fixed expense	$16,100	$16,100	$16,100
Budgeted operating expense	$75,880	$95,480	$85,680

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