Estimating flexible selling expense budget and computing sales volume variance. Seattle Products estimates that it will incur the following selling expenses next period:
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Salaries (fixed)
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$ 20,000
|
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Commissions (0.05 of sales revenue)
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17,875
|
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Travel (0.03 of sales revenue)
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10,725
|
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Advertising (fixed)
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50,000
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Sales Office Costs ($4,000 plus $0.05 per unit sold)
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7,250
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Shipping Costs ($0.10 per unit sold)
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6,500
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Total Selling Expenses
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$112,350
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a. Derive the cost equation for selling expenses.
(Hint: y= a + bx + cy)
b. Assume that Seattle sells 50,000 units during the period. Budgeted sales totaled 65,000 units at a budgeted sales price of $5.50 per unit. Prepare a variance report to show the difference between the master budget and the flexible budget.