The Marketing Director of VCC Limited is dissatisfied with the variances reported to him on the basis of actual costs being compared with the fixed budget for the costs attributed to the marketing function. As the management accountant, he is seeking your help in preparing a flexible budget for the calendar year 2021, based on the following information which is based on an estimated sales level of $10 million unless otherwise stated.

$000

Fixed costs Salaries -sales representatives - 200

Sales office 60

Salary -related costs 32

Rent 100

Depreciation: Furniture 5

Cars 67

Insurance 20

Advertising 250

Variable costs Sales representatives commission 64

Salary-related costs 121/2% 8

Sales representatives ordinary expenses 25

Bad debts 100

Stationery and postage 50

Agency fees 80

Semi-variable costs Telephone rentals 2,000

Metered calls 14,000

Sales representatives car expenses excluding

depreciation:

Fixed 7000

Variable 48,000

Sales promotions: the budget figures are to be based on the costs given below which relate to the years 2016 to 2019 and the estimates for 2020.

Year Costs Sales

$000 $million

2016 384 4.2

2017 402 5.1

2018 368 3.4

2019 450 7.5

2020 (estimate) 478 8.9

Required: Prepare a flexible budget for sales levels of $9m, $10m and $11.5m.