The Ferguson Company makes and sells a single product. The company has estimated the following costs in order to prepared their selling and administrative expenses budget for 2009: If the sales budget indicates that 120,000 units will be sold in 2009, the total budgeted selling and administrative expenses will be:
A) $329,000
B) $345,000
C) $198,000
D) $147,000

Question

The Ferguson Company makes and sells a single product. The company has estimated the following costs in order to prepared their selling and administrative expenses budget for 2009:  If the sales budget indicates that 120,000 units will be sold in 2009, the total budgeted selling and administrative expenses will be:
A) $329,000 
B) $345,000 
C) $198,000 
D) $147,000

Quizplus · Accepted Answer

To calculate the total budgeted selling and administrative expenses, we need to add up all the costs listed in the table.

$125,000 (advertising) + $88,000 (depreciation) + $70,000 (insurance) + $25,000 (office salaries) + $5,000 (office supplies) + $9,000 (postage) + $8,000 (rent) + $5,000 (repairs and maintenance)

= $335,000

However, we need to adjust this amount based on the expected sales volume of 120,000 units. We can use the high-low method to estimate the variable component of these expenses:

Variable selling and administrative expenses per unit = ($335,000 - $147,000) / (220,000 - 80,000)

= $2.19 per unit

Total budgeted selling and administrative expenses = $147,000 + ($2.19 per unit x 120,000 units)

= $345,080

Therefore, the best choice is B.

The Ferguson Company Makes and Sells a Single Product