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

Quizplus · Accepted Answer

The June payroll of $10,500 includes a base of $3,000 plus a variable component based on sales. With June sales at $150,000, the variable component is $7,500 ($10,500 - $3,000). This means the payroll is budgeted at $3,000 plus 5% of sales ($7,500 is 5% of $150,000). For July, with sales budgeted at $165,000, the payroll would be $3,000 plus 5% of $165,000 ($8,250), totaling $11,250.

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