The operating expense budget of MountainTop Creations is comprised of the following budget formulas for its fixed and variable selling and administrative expense items: Selling expenses: $288,000 per year + $18 per unit
Administrative expenses: $552,000 per year + 2% of sales
If MountainTop's sales budget includes sales of 5,000 units each month at a price $50 per unit, the total budgeted operating expense for the year would be:

Question

Quizplus · Accepted Answer

The total budgeted operating expense includes both fixed and variable components. Selling expenses are $288,000 fixed plus $18 per unit. For 60,000 units (5,000 units x 12 months), this is $1,080,000. Administrative expenses are $552,000 fixed plus 2% of sales. Sales are $3,000,000 (60,000 units x $50), so 2% is $60,000. Total expenses are $1,080,000 + $552,000 + $60,000 = $1,692,000.

The Operating Expense Budget of MountainTop Creations Is Comprised of the Following