Costs Per Unit Total Variable costs $18.60 $372,000 Step costs 4.25 85,000 Fixed
ID: 2413722 • Letter: C
Question
Costs
Per Unit
Total
Variable costs
$18.60
$372,000
Step costs
4.25
85,000
Fixed costs
8.80
176,000
Total selling and
administrative costs
$31.65
$633,000
A company’s selling and administrative costs for the month of August, when it sold 20,000 units, were as follows.Costs
Per Unit
Total
Variable costs
$18.60
$372,000
Step costs
4.25
85,000
Fixed costs
8.80
176,000
Total selling and
administrative costs
$31.65
$633,000
The variable costs represent sales commissions paid at the rate of 6.2% of sales. The step costs depend on the number of salespersons employed by the company. In August there were 17 persons on the sales force. However, two members have taken early retirement effective August 31. It is anticipated that these positions will remain vacant for several months. Total fixed costs are unchanged within a relevant range of 15,000 to 30,000 units per month. The company is planning a sales price cut of 10%, which it expects will increase sales volume to 24,000 units per month. If the company implements the sales price reduction, the total budgeted selling and administrative costs for the month of September would be A. $652,760 B. $679,760 C. $714,960 D. $759,600Explanation / Answer
August sale = 372000*100/6.2 = 6000000
Sale price per unit = 6000000/20000 = 300 per unit
September sales = 300*90%*24000 = 6480000
Variable cost = 6480000*6.2% = 401760
Fixed cost = 176000
Step cost = 85000/17*15 = 75000
So total budgeted selling and administrative cost :
So answer is a) $652760
Variable cost 401760 Stepd cost 176000 Fixed cost 75000 Total budgeted selling and administrative cost 652760