Whitaker Company budgets payroll at $3,000 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $10,500 with budgeted sales of $150,000. Sales for July are budgeted at $165,000, while purchases of inventory for July are budgeted at $85,000.
Depreciation and insurance for July are estimated at $750 and $500, respectively. Expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $3,000 in equipment and $1,200 in furniture is expected in July.
-
The July payroll should be budgeted at what amount?

Question

Whitaker Company budgets payroll at $3,000 per month plus a percentage of monthly sales. The June 	operating expense budget includes total payroll of $10,500 with budgeted sales of $150,000. Sales for 	July are budgeted at $165,000, while purchases of inventory for July are budgeted at $85,000.
Depreciation and insurance for July are estimated at $750 and $500, respectively. Expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $3,000 in equipment and $1,200 in furniture is expected in July.
-
The July payroll should be budgeted at what amount?

Quizplus · Accepted Answer

Given that the June payroll is $10,500 with sales of $150,000, and the payroll includes a fixed component of $3,000 (as stated in the question), we can calculate the variable component as a percentage of sales. The variable component for June is $10,500 - $3,000 = $7,500, which is 5% of sales ($150,000). For July, with sales budgeted at $165,000, the variable payroll component would be 5% of $165,000 = $8,250. Adding the fixed payroll of $3,000 gives a total July payroll budget of $11,250.

Whitaker Company Budgets Payroll at $3,000 Per Month Plus a Percentage