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.
If the percentage used to budget payroll increased 20%, what is the total payroll budgeted for July?

Question

Quizplus · Accepted Answer

The percentage used to budget payroll increased by 20%, so the new percentage is 120% of the old percentage. The old percentage can be calculated as follows:Payroll = $3,000 + (percentage * sales)$10,500 = $3,000 + (percentage * $150,000)percentage = 5%The new percentage is 120% of 5%, which is 6%. The total payroll budgeted for July is:Payroll = $3,000 + (6% * $165,000)Payroll = $12,900

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