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9 June, 11:35

Windathon, Inc. expects sales volume totaling $500,000 for June. Data for the month follows:

Sales commissions 4% of sales

Sales manager's salary $30,000 per month

Advertising expense $25,000 per month

Shipping expense. 1% of sales

Miscellaneous selling expenses $2,100 per month plus ¾% of sales

How much is Windathon's selling expense budget for June?

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  1. 9 June, 11:44
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    Here the variable cost can be computed using the following formula:

    Variable cost = (Sales commissions + Shipping expense + Miscellaneous selling expenses) * Sales

    Variable cost = (4% + 1% + 3/4%) x $500,000 = $28,750

    Fixed cost = Sales manager's salary + Advertising expense + Miscellaneous selling expenses

    = $30,000 + $25,000 + $2,100

    = $57,100

    Total selling expense budget = Variable cost + Fixed cost

    = $28,750 + $57,100

    = $85,850
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