Budgeted monthly selling and administrative expenses are:

Salary Expense (Fixed) $28,000

Sales Commissions 7% of Sales

Supplies Expense 2% of Sales

Utilities (Fixed) $ 1,400

Depreciation on Equipment (Fixed)* Calculate

Rent (Fixed) $ 3,000

Miscellaneous (Fixed) $ 800

*The capital expenditures budget shows that Baxter must purchase $134,000 of equipment on October 1st to establish the new center. Baxter will pay for the equipment on November 1st. The equipment is expected to have a 7-year useful life and a $6,600 salvage value. Prepare a selling and administrative expense budget.

f. Sales commissions, utilities and supplies are paid in the month following the one in which they are incurred. All other expenses are paid in the month in which they are incurred. Prepare a schedule of cash payments for selling and administrative expenses.

g. Using a line of credit, Baxter borrows and repays principal in increments of $1,000 on the last day of the month as needed. It pays interest of 1 percent per month in cash on the last day of the month. Company policy is to maintain an ending cash balance of at least $5,000. Prepare a cash budget.

h. Complete the monthly and first quarter pro forma income statement.