Estimating flexible selling expense budget and computing sales volume variance. Seattle Products estimates that it will incur the following selling expenses next period:
|
Salaries (fixed)
|
$ 20,000
|
|
Commissions (0.05 of sales revenue)
|
17,875
|
|
Travel (0.03 of sales revenue)
|
10,725
|
|
Advertising (fixed)
|
50,000
|
|
Sales Office Costs ($4,000 plus $0.05 per unit sold)
|
7,250
|
|
Shipping Costs ($0.10 per unit sold)
|
6,500
|
|
Total Selling Expenses
|
$112,350
|
a. Derive the cost equation for selling expenses. (Hint: y ¼ a þ bx þ cy.)
b. Assume that Seattle sells 50,000 units during the period. Budgeted sales totaled 65,000 units at a budgeted sales price of $5.50 per unit. Prepare a variance report to show the difference between the master budget and the flexible budget.