how can we calculate the variable cost in Selling and Administrative expenses in the attached file question?

User: accfinance70, put in his solution that variable cost for S&A is at 1.6

how did he come up with this number?

Solution-a Irrigation Corporation Sales Budget For the first quarter of 2016 January Expected unit sales Unit selling price Total sales 113000 12.00 1356000 Solution-b Irrigation Corporation Production Budget For the first quarter of 2016 January Expected unit sales Add: Desired ending finished goods units Total required units Less: Beginning finished goods units Required production units 113000 11250 124250 11300 112950 Solution-c Irrigation Corporation Direct Materials Budget For the first quarter of 2016 January Units to be produced (from part b) Direct materials per unit Total pounds needed for production Add: Desired ending direct materials (lbs) Total materials required Less: Beginning direct materials (lbs) Direct materials purchases Cost per pound Total cost of direct materials purchases 112950 2 225900 11285 237185 11295 225890 0.75 169417.50 Solution-d Irrigation Corporation Direct Labor Budget For the first quarter of 2016 January Units to be produced (from part b) Direct labor time (hours per unit) Total required direct labor-hours Direct labor cost per hour Total direct labor cost 112950 0.2 22590 8 180720 Solution-e Irrigation Corporation Manufacturing Overhead Budget For the first quarter of 2016 January Variable costs Indirect materials (30 per hour) Indirect labor (50 per hour) Utilities (45 per hour) Maintenance (25 per hour) Total variable costs Fixed costs Salaries Depreciation Property taxes Insurance Maintenance Fixed manufacturing overhead Total manufacturing overhead Total manufacturing overhead Direct labor hours (from part d) Predetermined overhead rate for the quarter 6777 11295 10165.50 5647.50 33885 42000 16800 2675 1200 1300 63975 97860 22590 Solution-f Irrigation Corporation Selling and Administrative Expense Budget For the first quarter of 2016 January Budget sales in units (from part a) Variable expenses per unit Total variable S & A expense Fixed expenses: Advertising Insurance 113000 1.6 180800 15000 1400 72000 2500 3000 563400 744200 Salaries Depreciation Other Total fixed expenses Total S & A expenses Solution-g Accounts receivable, 12/31/16 January February March Total cash collections Schedule of Expected Collections from Customers January 183750 1152600 1336350 Solution-h Accounts payable, 12/31/16 January February March Total payments Schedule of Expected Payments for Direct Materials January 120595 84708.75 205303.75 Solution-i Irrigation Corporation Cash Budget For the first quarter of 2016 January Beginning cash balance Add: Receipts Collections from customers Total available cash Less: Disbursements Direct materials Direct labor Manufacturing overhead Selling and administrative Equipment purchase Dividends Total disbursements Excess (deficiency) of available cash over cash disbursements Financing: Borrowings 100500 1336350 1436850 205303.75 180720 81060 741700 12500 1221283.75 215566.25 116000 Repayments Interest Ending cash balance 331566.25 ation t of 2016 First Quarter February March Quarter 112500 12.00 1350000 116000 12.00 1392000 341500 12.00 4098000 First Quarter February March Quarter 112500 11600 124100 11250 112850 116000 12500 128500 11600 116900 341500 12500 354000 11300 342700 First Quarter February March Quarter 112850 2 225700 11690 237390 11285 226105 0.75 169578.75 116900 2 233800 12625 246425 11690 234735 0.75 176051.25 342700 2 685400 12625 698025 11295 686730 0.75 515047.50 ation dget of 2016 ation udget of 2016 ation dget of 2016 First Quarter February March Quarter 112850 0.2 22570 8 180560 116900 0.2 23380 8 187040 342700 0.2 68540 8 548320 First Quarter February March Quarter 6771 11285 10156.50 5642.50 33855 7014 11690 10521.00 5845.00 35070 20562 34270 30843 17135 102810 42000 16800 2675 1200 1300 63975 97830 42000 16800 2675 1200 1300 63975 99045 126000 50400 8025 3600 3900 191925 294735 23380 294735 68540 4.30 March Quarter 112500 1.6 180000 116000 1.6 185600 341500 1.6 546400 15000 1400 15000 1400 45000 4200 ation ad Budget of 2016 22570 ation Expense Budget of 2016 First Quarter February 72000 2500 3000 469500 649500 ns from Customers February 203400 1147500 1350900 s for Direct Materials February 72000 2500 3000 375600 561200 216000 7500 9000 281700 828100 March Quarter 202500 1183200 1385700 1356000 1350000 1392000 4098000 March Quarter 84789.375 88025.625 169417.50 169578.75 176051.25 169498.125 172815 515047.5 First Quarter February March Quarter 331566.25 208651.125 100500 1350900 1682466.25 1385700 1594351.125 4072950 4713667.375 169498.125 180560 81030 647000 500000 12500 1590588.125 91878.125 172815 187040 82245 558700 547616.875 548320 244335 1947400 500000 37500 3825171.875 888495.5 84708.75 84789.375 ation t of 2016 12500 1013300 581051.125 116000 116000 773 208651.125 581051.125 116000 773 1121268.5 ACC 522: Fall, 2016 MANAGERIAL ACCOUNTING The facts and figures relating to Irrigation Corporation are as follows. Irrigation Corporation produces plastic garden sprinklers. The company is preparing its budget for 2016. The first step is to plan for the first quarter of that coming year. Irrigation has collected the following information from the managers. 1. Sales: Sales for November 2014 Sales for December 2014 Expected sales for January 2015 Expected sales for February 2015 Expected sales for March 2015 Expected sales for April 2015 Expected sales for May 2015 Selling price per unit 112,500 units 102,100 units 113,000 units 112,500 units 116,000 units 125,000 units 137,500 units $12 Irrigation likes to keep 10% of next month's unit sales in ending inventory. All sales are on credit. 85% of the accounts receivable are collected in the month of sale and 15% of the accounts receivable are collected in the month after sale. Accounts receivable on December 31, 2015, totaled $183,780. 2. Direct Materials: 2 pounds of direct materials is needed to produce one unit. Irrigation likes to keep 5% of the materials needed for the next month's production in its ending inventory. Raw materials on hand on December 31, 2015, totaled 11,295 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid after the month of purchase. Accounts payable on December 31, 2015, totaled $120,595. 3. Direct Labor Labor requires 12 minutes per unit for completion and is paid at a rate of $8 per hour. 4. Manufacturing Overhead 1 Indirect materials Indirect labor Utilities Maintenance Factory supervisor's salary Factory Depreciation Property taxes Insurance Repairs 5. Selling and Administrative expenses Salaries Advertising Insurance Office Depreciation Other fixed costs 6. $0.30 per labor hour $0.50 per labor hour $0.45 per labor hour $0.25 per labor hour $42,000 per month $16,800 per month $ 2,675 per month $ 1,200 per month $ 1,300 per month $72,000 per month $15,000 per month $ 1,400 per month $ 2,500 per month $ 3,000 per month Other Information The cash balance on December 31, 2015, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2016. Dividends are paid each month @ $2.50 per share for 5,000 shares. The company has an open line of credit with national Bank. The terms of the agreement require borrowing to be in the increments of $1,000, and the interest rate is 8%. Irrigation borrows on the first day of the month and repays on the last day of the month if possible. A $500,000 equipment purchase is planned for February 2016. Instructions: 1. This project requires the use of EXCEL spreadsheets to prepare various budgets for a manufacturing company. 2 2. should PREPARE the following documents for the first quarter (January, February & March) of 2016 by using a MS EXCEL spreadsheet: (a)Sales Budget (b) Production Budget (c)Direct Materials Purchase Budget (d) Direct Labor Budget (e)Manufacturing Overhead Budget (f) Selling and Administration Budget (g)Schedule of expected cash collections from customers (h) Schedule for expected cash payments for materials purchases (i) A Cash Budget. 3. The MS EXCEL spreadsheet cells should be linked so that change in one cells changes all linked cells. 4. The MS EXCEL spreadsheet should be well formatted to look pleasing to the eye and fit within the printing margins. 3