Comma Co. makes and sells widgets. The company is in the process of preparing its selling and administrative expense budget for the month. The following budget data are available: $\begin{array}{lcc}\text { Item }&\text { Variable Cost Per Unit Sold }&\text { Monthly Fixed Cost }\
\text { Sales commissions } & \$ 1 & \$ 10,000 \
\text { Shipping } & \$ 3 & \
\text { Advertising } & \$ 4 &\\text { Executive salaries } & & \$ 120,000 \
\text { Depreciation on office equipment } && \$ 4,000 \
\text { Other } & \$ 2 & \$ 6,000
\end{array}$ Expenses are paid in the month incurred. If the company has budgeted to sell 80,000 widgets in October, how much is the total budgeted selling and administrative expenses for October?

Question

Quizplus · Accepted Answer

The total budgeted selling and administrative expenses are calculated by adding the total variable costs and total fixed costs. Variable costs per unit are $1 (sales commissions) + $3 (shipping) + $4 (advertising) + $2 (other) = $10 per unit. For 80,000 units, the total variable cost is 80,000 * $10 = $800,000. The total fixed costs are $10,000 (sales commissions) + $120,000 (executive salaries) + $4,000 (depreciation) + $6,000 (other) = $140,000. Therefore, the total expenses are $800,000 + $140,000 = $940,000.

Comma Co Makes and Sells Widgets Expenses Are Paid in the Month Incurred