Question

1. Flexible Budget for Selling and Administrative Expenses for a Service Company

   Cloud Productivity Inc. uses flexible An accounting device used to plan and control resources of operational departments and divisions.budgets that are based on the following data:

   Sales commissions	14% of sales
   Advertising expense	18% of sales
   Miscellaneous administrative expense	$7,500 per month plus 12% of sales
   Office salaries expense	$28,000 per month
   Customer support expenses	$12,000 per month plus 20% of sales
   Research and development expense	$32,000 per month

   Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)

   Cloud Productivity Inc.
   Flexible Selling and Administrative Expenses Budget
   For the Month Ending March 31
   Total sales	$400000	$500000	$600000
   Variable cost:
   Cash Office salaries expense Sales commissions Supplies expense Wages expense	$	$	$
   Advertising expense Cash Office salaries expense Supplies expense Wages expense
   Miscellaneous administrative expense Office salaries expense Prepaid insurance Rent expense Wages expense
   Customer support expenses Rent expense Research and development expense Supplies expense Wages expense
   Total variable cost	$	$	$
   Fixed cost:
   Insurance expense Miscellaneous administrative expense Rent expense Supplies expense Wages expense	$	$	$
   Insurance expense Office salaries expense Prepaid insurance Rent expense Wages expense
   Customer support expenses Insurance expense Rent expense Supplies expense Wages expense
   Insurance expense Rent expense Research and development expense Supplies expense Wages expense
   Total fixed cost	$	$	$
   Total selling and administrative expenses	$	$	$

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Answer 1

Solution

Cloud Productivity Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending March 31
Total sales	$ 400,000	$ 500,000	$ 600,000
Variable cost:
Sales commission	$ 56,000	$ 70,000	$ 84,000
Advertising expenses	$ 72,000	$ 90,000	$ 108,000
Miscellaneous administrative expense	$ 48,000	$ 60,000	$ 72,000
Customer support expenses	$ 80,000	$ 100,000	$ 120,000
Total variable cost	$ 256,000	$ 320,000	$ 384,000
Fixed cost:
Miscellaneous administrative expense	$ 7,500	$ 7,500	$ 7,500
Office salaries expenses	$ 28,000	$ 28,000	$ 28,000
Customer support expenses	$ 12,000	$ 12,000	$ 12,000
Research and development expense	$ 32,000	$ 32,000	$ 32,000
Total fixed cost	$ 79,500	$ 79,500	$ 79,500
Total selling and administrative expenses	$ 335,500	$ 399,500	$ 463,500