Minneota Corp. sells its product for $100. Forecast sales are 1,500 units in Oct
ID: 3009141 • Letter: M
Question
Minneota Corp. sells its product for $100. Forecast sales are 1,500 units in October, 1,800 in November, and 1,700 in December. Variable costs are based on sales, and consist of commissions (7% of sales), advertising (3%) and shipping (4%). Fixed costs per month are $3,900 sales salaries, $3,200 office salaries, $2,000 depreciation, $1,900 office rent, $800 insurance and $800 utilities.
Prepare Minneota Corp’s selling and administrative expense budget for the period October – December. Present monthly totals as well as a 3-month total.
Minneota Corp. sells its product for $100. Forecast sales are 1,500 units in October, 1,800 in November, and 1,700 in December. Variable costs are based on sales, and consist of commissions (7% of sales), advertising (3%) and shipping (4%). Fixed costs per month are $3,900 sales salaries, $3,200 office salaries, $2,000 depreciation, $1,900 office rent, $800 insurance and $800 utilities.
Explanation / Answer
October November December Total Variable: Commissions: 100*(units)*0.07 $10,500 $12,600 $11,900 $35,000 Advertising: 100*(units)*0.03 $4,500 $5,400 $5,100 $15,000 Shipping: 100*(units)*0.04 $6,000 $7,200 $6,800 $20,000 Total Variable: $21,000 $25,200 $23,800 $70,000 Sales Salaries: $3,900 $3,900 $3,900 $11,700 Office Salaries: $3,200 $3,200 $3,200 $9,600 Depreciation: $2,000 $2,000 $2,000 $6,000 Office Rent: $1,900 $1,900 $1,900 $5,700 Insurance $800 $800 $800 $2,400 Utilities $800 $800 $800 $2,400 Total Fixed: $12,600 $12,600 $12,600 $37,800 Total S & A 100*(units) $150,000 $180,000 $170,000