Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Flexible Budget for Selling and Administrative Expenses for a Service Company
Digital Solutions Inc. uses flexible budgets that are based on the following data:
| Sales commissions | 15% of sales |
| Advertising expense | 20% of sales |
| Miscellaneous administrative expense | $7,500 per month plus 12% of sales |
| Office salaries expense | $30,000 per month |
| Customer support expenses | $13,000 per month plus 20% of sales |
| Research and development expense | $31,000 per month |
Prepare a flexible selling and administrative expenses budget for October for sales volumes of $400,000, $500,000, and $600,000. (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 | $500,000 | $600,000 |
| Variable cost: | |||
| Sales commissions | |||
| Advertising expense | |||
| Miscellaneous administrative expense | |||
| Customer support expenses | |||
| Total variable cost | |||
| Fixed cost: | |||
| Miscellaneous administrative expense | |||
| Office salaries expense | |||
| Customer support expenses | |||
| Research and development expense | |||
| Total fixed cost | |||
| Total selling and administrative expenses |
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