Question
Estimating flexible selling expense budget and computing sales volume variance. Miami Products estimates that it will incur the following selling expenses next period: Salaries (fixed)
Estimating flexible selling expense budget and computing sales volume variance. Miami 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 = a + bx + cy.)
B. Assume that Miami 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.
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