Kapital Inc has prepared the operating budget for the first

Kapital Inc. has prepared the operating budget for the first quarter of 2015. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Variable and fixed expenses are as follows:

Variable: Power cost (40% of Sales)
Miscellaneous expenses: (5% of Sales)
Fixed: Salary expense: $8,000 per month
Rent expense: $5,000 per month
Depreciation expense: $1,200 per month
Power cost/fixed portion: $800 per month
Miscellaneous expenses/fixed portion: $1,000 per month

Using the information above, calculate the amount of selling and administrative expenses for the month of February.

Select one:

A. $47,500

B. $41,700

C. $43,000

D. $38,500

Solution

Forecast sales in February = 60000
Variable: Power cost (40% of Sales)= 0.40*60000 = 24000
Miscellaneous expenses: (5% of Sales) = 0.05*60000 = 3000
Fixed: Salary expense = 8000
Rent expense = 5000
Depreciation expense = 1200
Power cost/fixed portion = 800
Miscellaneous expenses/fixed portion = 1000

Hence amount of selling and administrative expenses for the month of February=24000+3000+8000+5000+1200+800+1000
=43000
Hence choice C is correct.