High Trails manufactures backpacks for adventurers. Totals sales for the year are budgeted at 3,200 backpacks, at a price of $90 each. Variable selling expenses include commissions (3% of sales price) and delivery costs ($12/backpack). Annual fixed selling and administrative expenses include general liability insurance ($12,000), sales fleet depreciation ($180,000), administrative salaries ($360,000), and rent on the office building ($84,000). High Trails pays all costs as they are incurred.
What is the amount of cash budgeted for Selling and Administrative expenses for the year?

Question

Quizplus · Accepted Answer

Variable Costs:
Commissions: $90/backpack x 3,200 backpacks x 3% = $8,640
Delivery Costs: $12/ backpack x 3,200 backpacks = $38,400
Fixed costs:
Insurance $12,000 + Salaries $360,000 + Rent $84,000 (depreciation is not a cash expense)
= $456,000
Total Budgeted Selling and Administrative Expenses: $8,640 + $38,400 + $456,000 = $503,040

High Trails Manufactures Backpacks for Adventurers