Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $166,300 to $208,000. Variable costs and their percentage relationship to sales are sales commissions 8%, advertising 4%, traveling 4%, and delivery 1%. Fixed selling expenses will consist of sales salaries $35,500, depreciation on delivery equipment $7,400, and insurance on delivery equipment $1,400.

Prepare a monthly flexible budget for each $13,900 increment of sales within the relevant range for the year ending December 31, 2017.

FALLON COMPANY Monthly Selling Expense Flexible Budget For the Year 2017

Answer 1

Monthly Selling Expense Flexible Budget
For the Year 2017
Activity level
Sales Revenue	166300	180200	194100	208000
Variable expenses
Sales commissions	13304	14416	15528	16640
Advertising	6652	7208	7764	8320
Traveling	6652	7208	7764	8320
Delivery	1663	1802	1941	2080
Total variable expenses	28271	30634	32997	35360
Fixed expenses:
Sales salaries	35500	35500	35500	35500
Depreciation	7400	7400	7400	7400
Insurance	1400	1400	1400	1400
Total fixed expenses	44300	44300	44300	44300
Total expenses	72571	74934	77297	79660