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The selling and administrative expense budget of Choo Corporation is based on budgeted unit sales, which are 4,600 units for August. The variable selling and administrative expense is $7.30 per unit. The budgeted fixed selling and administrative expense is $51,980 per month, which includes depreciation of $6,440 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the August selling and administrative expense budget should be:

a. $45,540

b. $85,560

c. $79,120

d. $33,580

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Romarie Khazandra Marijuan
Romarie Khazandra MarijuanLv10
25 Jan 2021
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E8-6 - Please explain how you arrived at your answers.Thank you!

Exercise 8-6 Selling and Administrative Expense Budget [LO7]

The budgeted unit sales ofHaerve Company for the upcoming fiscal year are providedbelow:
1stQuarter 2ndQuarter 3rdQuarter 4thQuarter
Budgeted unitsales 11,100 13,100 10,400 9,700

The company’s variable selling and administrative expenses perunit are $1.50. Fixed selling and administrative expenses includeadvertising expenses of $12,000 per quarter, executive salaries of$37,000 per quarter, and depreciation of $15,000 per quarter. Inaddition, the company will make insurance payments of $5,000 in the2nd Quarter and $5,000 in the 4th Quarter. Finally, property taxesof $6,000 will be paid in the 3rd Quarter.

Required:

Prepare the company’s selling and administrative expense budgetfor the upcoming fiscal year. (Input all amounts aspositive values. Leave no cells blank - be certain to enter "0"wherever required. Omit the "$" sign in yourresponse.)

Haerve Company
Selling and Administrative Expense Budget

1st
Quarter		 2nd
Quarter		 3rd
Quarter		 4th
Quarter		 Year
(Click toselect)Variable selling and administrativeexpensesDepreciationProperty taxesExecutive salariesInsurance $ $ $ $ $
Fixed selling andadministrative expenses:
(Click toselect)BorrowingsEquipment purchsesInterestAdvertisingVariableselling and administrative expenses
(Click toselect)BorrowingsExecutive salariesInterestEquipmentpurchasesVariable selling and administrative expenses
(Click toselect)InsuranceVariable selling and administrativeexpensesBorrowingsEquipment purchasesInterest
(Click to select)Variableselling and administrative expensesEquipment purchasesPropertytaxesBorrowingsInterest
(Click toselect)BorrowingsVariable selling and administrativeexpensesInterestDepreciationEquipment purchases
Total fixed sellingand administrative expenses
Total selling andadministrative expenses
(Click to select)LessdepreciationLess insuranceLess advertisingLess executivesalariesLess property taxes
Cash disbursementsfor selling and administrative expenses $ $ $ $ $

Budgeted monthly selling and administrative expenses are:

Salary Expense (Fixed) $28,000

Sales Commissions 7% of Sales

Supplies Expense 2% of Sales

Utilities (Fixed) $ 1,400

Depreciation on Equipment (Fixed)* Calculate

Rent (Fixed) $ 3,000

Miscellaneous (Fixed) $ 800

*The capital expenditures budget shows that Baxter must purchase $134,000 of equipment on October 1st to establish the new center. Baxter will pay for the equipment on November 1st. The equipment is expected to have a 7-year useful life and a $6,600 salvage value. Prepare a selling and administrative expense budget.

f. Sales commissions, utilities and supplies are paid in the month following the one in which they are incurred. All other expenses are paid in the month in which they are incurred. Prepare a schedule of cash payments for selling and administrative expenses.

g. Using a line of credit, Baxter borrows and repays principal in increments of $1,000 on the last day of the month as needed. It pays interest of 1 percent per month in cash on the last day of the month. Company policy is to maintain an ending cash balance of at least $5,000. Prepare a cash budget.

h. Complete the monthly and first quarter pro forma income statement.

Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operations: a. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,500, 26,000, 28,000, and 29,000 units, respectively. All sales are on credit. b. Forty percent of credit sales are collected in the month of the sale and 60% in the following month. c. The ending finished goods inventory equals 25% of the following month’s unit sales. d. The ending raw materials inventory equals 15% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.40 per pound. e. Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month. f. The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor-hours. g. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $65,000.

Q: What is the estimated total selling and administrative expense for July?

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