Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $172,100 to $205,400. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 6%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,400, depreciation on delivery equipment $6,500, and insurance on delivery equipment $1,200.

Prepare a monthly flexible budget for each $11,100 increment of sales within the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)


FALLON COMPANY Monthly Selling Expense Flexible Budget For the Year 2017

Answer 1

Fallon Company Flexible Budget Monthly Selling Expenses Flexible Budget For the year 2017 Sales Level 172100 183200 194300 205400 Variable costs: Sales Comm. 6% 11658 10326 10992 12324 Advertising 6% Travelling 3% Delivery 2% 12324 10326 10992 11658 6162 5163 5496 5829 3664 4108 344 3886 Total Variable Cost 31144 29257 33031 34918 Contribution 152056 161269 142843 170482 Fixed Costs: Sales Salaries 35400 35400 35400 35400 6500 Depreciation 6500 6500 6500 1200 Insurance 1200 1200 1200 Total Fixed Costs 43100 43100 43100 43100 99743 108956 118169 Operating Income 127382

1 Fallon Company 2 3 Flexible Budget 4 Monthly Selling Expenses Flexible Budget 5 For the year 2017 6 Sales Level 172100 =B6+11100 =C6+11100 =D6+11100 8 Variable costs: 9 Sales Comm. 6% 10 Advertising 6% =B6*0.06 =C6*0.06 =D6*0.06 =E6*0.06 =B6*0.06 =C6*0.06 =D6*0.06 =E6*0.06 11 Travelling 3% =B6*0.03 =C6*0.03 =D6*0.03 =E6*0.03 12 Delivery 2% =B6*0.02 =C6*0.02 =D6*0.02 =E6*0.02 =SUM(C9:C12) 13 Total Variable Cost =SUM(B9:B12) =SUM(D9:D12) =SUM(E9:E12) 14 15 Contribution =B6-B13 =C6-C13 =D6-D13 =E6-E13 16 17 Fixed Costs: 18 Sales Salaries 35400 35400 35400 35400 6500 19 Depreciation 6500 6500 6500 1200 1200 1200 1200 20 Insurance =SUM(C18:C20) 21 Total Fixed Costs =SUM(B18:B20) =SUM(D18:D20) =SUM(E18:E20) 22 23 Operating Income =B15-B21 =C15-C21 =D15-D21 =E15-E21