Prepare flexible budget for selling and administration expenses

The Clay Company wants you to prepare flexible budget for selling and administrative expenses. The general manager and the sales manager have met with all the department heads, and they have provided you with the following information regarding selling and administrative expenses;

1.The company presently employs 40 full-time salespersons with a base salary of $200 each per month plus commissions. In addition, the company employs eight regional sales managers each with a salary of $18,000 per year and one general sales manager with a salary of $24,000 per year, none of whom is entitled to any commissions.

2.If sales volume exceeds $15 million per year, the company will need to hire five more salespersons and one more regional sales manager.

3.Sales commissions are 5%, 3%, or o% of the sales, depending on the product sold. Typically, a 5% commission applies to 70% of sales, a 3% commission applies to 20% of sales, and no commission applies to the remaining 10% of sales.

4.Salesperson's travel allowances average $500 per month per salesperson (excluding managers).

5.Advertising expenses average $50,000 per month plus 2% of sales.

6.Selling supplies expense is estimated at 1% of sales.

7.Administrative salaries are $40,000 per month.

8.Other administrative expenses include the following:

Rent-$5,000 per month

Office supplies-1% of sales

Other administrative Expenses (telephone, etc)-$1,200 per month.

Required:

Prepare flexible budget for selling and administrative expenses for sales volumes of $12 million, $ 14 million, and $16 million per year.