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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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