Exercise 2312 Kirkland Company combines its operating expens

Exercise 23-12 Kirkland Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2017, the following data are available 1. Sales: 20,000 units quarter 1; 22,700 units quarter 2. 2. Variable costs per dollar of sales: sales commissions 596, delivery expense 296, and advertising 396. 3. Fixed costs per quarter: sales salaries $10,800, office salaries $6,360, depreciation $4,370, insurance $1,610, utilities $850, and repairs expense $620. Unit selling price: $23. 4. Prepare a selling and administrative expense budget by quarters for the first 6 months of 2017. (List variable expenses before fixed expense.)

Solution

KIRKLAND COMPANY Selling and administrative budget For quarter1 and quarter 2 Quarter 1 2 Six months Number of unit sales                                          20,000                                          22,700          42,700 Variable costs Sales commission 20,000*$23*5% = $23,000 27,000*$23*5% = $31,050 $      54,050 Delivery expenses 20,000*$23*2% = $9,200 27,000*$23*2% = $12,420 $      21,620 Advertising expenses 20,000*$23*3% = $13,800 27,000*$23*3% = $18,630 $      32,430 Total variable costs $                                      46,000 $                                      62,100 $   108,100 Fixed costs Sales salaries $                                      10,800 $                                      10,800 $      21,600 Office salaries $                                        6,360 $                                        6,360 $      12,720 Depreciation $                                        4,370 $                                        4,370 $        8,740 Insurance $                                        1,610 $                                        1,610 $        3,220 Utilities $                                            850 $                                            850 $        1,700 Repairs expense $                                            620 $                                            620 $        1,240 Total fixed costs $                                      24,610 $                                      24,610 $      49,220 Total selling and administrative costs $                                      70,610 $                                      86,710 $   157,320