Question

ABC Company's budgeted sales for June, July, and August are 14,600, 18,600, and 16,600 units respectively. The following cost behavior patterns are budgeted for ABC Company's operating expenses each month: Fixed costs: salaries, $3,300; rent, $6,300; depreciation, $3,700; advertising, $4,500 Mixed costs: utilities, $4,300 + $0.60 per unit Variable costs per unit sold: sales commissions, $3.30; marketing promotions, $2.30; supplies, $0.50; bad debt expense, $0,20 Required: Prepare ABC Company's operating expense budget for June, July, and August. June July August 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

Answer 1

	June	July	August
Variable operating expenses:
Sales Commissions	48180	61380	54780
Marketing promotions	33580	42780	38180
Supplies	7300	9300	8300
Bad debts expense	2920	3720	3320
Utilities	8760	11160	9960
Total variable expense	100740	128340	114540
Fixed operating expenses:
Salaries	3300	3300	3300
Rent	6300	6300	6300
Depreciation	3700	3700	3700
Advertising	4500	4500	4500
Utilities	4300	4300	4300
Total fixed expenses	22100	22100	22100
Budgeted operating expenses	122840	150440	136640

Workings:
	June	July	August
Variable operating expenses:
Sales Commissions	=14600*3.3	=18600*3.3	=16600*3.3
Marketing promotions	=14600*2.3	=18600*2.3	=16600*2.3
Supplies	=14600*0.5	=18600*0.5	=16600*0.5
Bad debts expense	=14600*0.2	=18600*0.2	=16600*0.2
Utilities	=14600*0.6	=18600*0.6	=16600*0.6