Question

1. Flexible budget for selling and administrative expenses for a service company

   Digital Solutions 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	9% of sales
   Advertising expense	16% of sales
   Miscellaneous administrative expense	$11,500 per month plus 3% of sales
   Office salaries expense	$48,000 per month
   Customer support expenses	$16,000 per month plus 33% of sales
   Research and development expense	$79,000 per month

   This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.

   Open spreadsheet

   Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $900,000, and $1,000,000. (Use Exhibit 5 as a model.) Enter all amounts as positive numbers.

   Digital Solutions Inc.
   Flexible Selling and Administrative Expenses Budget
   For the Month Ending October 31
   Total sales	$400,000		$900,000		$1,000,000
   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		$		$		$

   Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $900,000, and $1,000,000. (Use Exhibit 5 as a model.) Enter all amounts as positive numbers.

   Digital Solutions Inc.
   Flexible Selling and Administrative Expenses Budget
   For the Month Ending October 31
   Total sales	$400,000		$900,000		$1,000,000
   Variable cost:
   		$		$		$
   Total variable cost		$		$		$
   Fixed cost:
   		$		$		$
   Total fixed cost		$		$		$
   Total selling and administrative expenses		$		$		$

   Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $900,000, and $1,000,000. (Use Exhibit 5 as a model.)

   Digital Solutions Inc.
   Flexible Selling and Administrative Expenses Budget
   For the Month Ending October 31
   Total sales	$400,000		$900,000		$1,000,000
   Variable cost:
   Sales commissions		$36,000		$81,000		$90,000
   Advertising expense		64,000		144,000		160,000
   Miscellaneous administrative expense		12,000		27,000		30,000
   Customer support expenses		132,000		297,000		330,000
   Total variable cost		$244,000		$549,000		$610,000
   Fixed cost:
   Miscellaneous administrative expense		$11,500		$11,500		$11,500
   Office salaries expense		48,000		48,000		48,000
   Customer support expenses		16,000		16,000		16,000
   Research and development expense		79,000		79,000		79,000
   Total fixed cost		$154,500		$154,500		$154,500
   Total selling and administrative expenses		$398,500		$703,500		$764,500

Answer 1

Answer

• Requirement

Digital Solutions Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending October 31
Total sales	$400,000	$900,000	$1,000,000
Variable cost:
Sales commissions	$36,000	$81,000	$90,000
Advertising expense	$64,000	$144,000	$160,000
Miscellaneous administrative expense	$12,000	$27,000	$30,000
Customer support expenses	$132,000	$297,000	$330,000
Total variable cost	$244,000	$549,000	$610,000
Fixed cost:
Miscellaneous administrative expense	$11,500	$11,500	$11,500
Office salaries expense	$48,000	$48,000	$48,000
Customer support expenses	$16,000	$16,000	$16,000
Research and development expense	$79,000	$79,000	$79,000
Total fixed cost	$154,500	$154,500	$154,500
Total selling and administrative expenses	$398,500	$703,500	$764,500

--Working for variable cost

Total sales	400000	900000	1000000
Variable cost:
Sales commissions	=400000*9%	=900000*9%	=1000000*9%
Advertising expense	=400000*16%	=900000*16%	=1000000*16%
Miscellaneous administrative expense	=400000*3%	=900000*3%	=1000000*3%
Customer support expenses	=400000*33%	=900000*33%	=1000000*33%