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Chapter 22: Q32E (page 1237)

Preparing an operating budget—selling and administrative expense budget

Consider the sales budget presented in Exercise E22-31. Slate’s selling and administrative expenses include the following:

Rent, \(2,000 per month

Salaries, \)4,000 per month

Commissions, 5% of sales

Depreciation, $1,000 per month

Miscellaneous expenses, 2% of sales

Prepare a selling and administrative expense budget for each of the three quarters of 2018 and totals for the nine-month period.

Short Answer

Expert verified

Answer

The total budget S & A spending is $ 97,650.

Step by step solution

01

Preparation of selling and administrative budget


March 31

June 30

September 30

Total

Salaries

$6,000

$6,000

$6,000

$18,000

Rent

$12,000

$12,000

$12,000

$36,000

Commissions

$7,000

$9,500

$8,250

$24,750

Depreciation

$3,000

$3,000

$3,000

$9,000

Miscellaneous expense

$2,800

$3,800

$3,300

$9,900

Total budgeted S&A Expenses

$30,800

$34,300

$32,550

$97,650

02

Statement showing commissions


March 31

June 30

September 30

Total

Budgeted sales

$140,000

$190,000

$165,000

$495,000

Commission

X 5%

X 5%

X 5%

X 5%

Commissions

$7,000

$9,500

$8,250

$24,750

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Most popular questions from this chapter

Question: Preparing an operating budget—sales budget; inventory, purchases and COGS budget; and S&A expense budget Burton Office Supply’s March 31, 2018, balance sheet follows:

The budget committee of Burton Office Supply has assembled the following data: a. Sales in April are expected to be \(200,000. Burton forecasts that monthly sales will increase 2% over April sales in May. June’s sales will increase by 4% over April sales. July sales will increase 20% over April sales. b. Burton maintains inventory of \)15,000 plus 25% of the cost of goods sold budgeted for the following month. Cost of goods sold equal 50% of sales revenue. c. Monthly salaries amount to \(7,000. Sales commissions equal 5% of sales for that month. d. Other monthly expenses are as follows: • Rent: \)2,000 • Depreciation: \(200 • Insurance: \)100 • Income tax: $2,200

Requirements

1. Prepare Burton’s sales budget for April and May 2018. Round all calculations to the nearest dollar.

2. Prepare Burton’s inventory, purchases, and cost of goods sold budget for April and May.

3. Prepare Burton’s selling and administrative expense budget for April and May.

Preparing an operating budget—manufacturing overhead budget Bennett Company expects to produce 2,030 units in January that will require 8,120 hours of direct labor and 2,210 units in February that will require 8,840 hours of direct labor. Bennett budgets \(10 per unit for variable manufacturing overhead; \)2,100 per month for depre000ciation; and $78,460 per month for other fixed manufacturing overhead costs. Prepare Bennett’s manufacturing overhead budget for January and February, including the predetermined overhead allocation rate using direct labor hours as the allocation base.

Why is the sales budget considered the cornerstone of the master budget?

Budgeting benefits List the three key benefits companies get from preparing a budget.

Preparing an operating budget—direct labor budget Baker Company expects to produce 2,050 units in January and 1,994 units in February. Baker budgets five direct labor hours per unit. Direct labor costs average $9 per hour. Prepare Baker’s direct labor budget for January and February.
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