1.
DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are
expected to range from $167,300 to $202,400. Variable costs and their percentage relationship to
sales are: Sales Commissions 6%, Advertising 5%, Traveling 3%, and Delivery 2%. Fixed
selling expenses will consist of Sales Salaries $34,721, Depreciation on Delivery Equipment
$6,948, and Insurance on Delivery Equipment $1,115.
Prepare a monthly flexible budget for each $11,700 increment of sales within the relevant range
for the year ending December 31, 2014
Solution
Flexible Budget for year ending December 31, 2014 Sales $ 167,300 $ 179,000 $
190,700 $ 202,400 Less: Variable expenses Sales Commission (6% of sales) $ 10,038
$ 10,740 $ 11,442 $ 12,144 Advertising (5% of sales) $ 8,365 $
8,950 $ 9,535 $ 10,120 Traveling (3% of sales) $ 5,019 $ 5,370
$ 5,721 $ 6,072 Delivery (2% of sales) $ 3,346 $ 3,580 $
3,814 $ 4,048 Contribution = Sales - Total variable expenses $ 140,532 $
150,360 $ 160,188 $ 170,016 Less: Fixed expenses Sales salaries $ 34,721 $
34,721 $ 34,721 $ 34,721 Depreciation on delivery equipment $ 6,948 $
6,948 $ 6,948 $ 6,948 Insurance on delivery equipment $ 1,115 $
1,115 $ 1,115 $ 1,115 Net Budgeted Income = Contribution - Total fixed expenses
$ 97,748 $ 107,576 $ 117,404 $ 127,232