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Windathon, Inc. expects sales volume totaling $500,000 for June. Data for the month follows:
Sales commissions 4% of sales
Sales manager's salary $30,000 per month
Advertising expense $25,000 per month
Shipping expense. 1% of sales
Miscellaneous selling expenses $2,100 per month plus ¾% of sales
How much is Windathon’s selling expense budget for June?

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isyllus

Answer:

Here the variable cost can be computed using the following formula:

Variable cost = (Sales commissions  + Shipping expense + Miscellaneous selling expenses) ×Sales

Variable cost = (4% + 1% + 3/4%) x $500,000 = $28,750

Fixed cost = Sales manager's salary + Advertising expense + Miscellaneous selling expenses

= $30,000 + $25,000 + $2,100

= $57,100

Total selling expense budget = Variable cost + Fixed cost

= $28,750 + $57,100

= $85,850

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