Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July. If the percentage of monthly sales used in budgeting payroll increases 25%, what would the total payroll budgeted for July be?

Question

Quizplus · Accepted Answer

The original percentage of sales for payroll is calculated as ($13,200 - $3,600) / $160,000 = 6%. With a 25% increase, the new percentage is 6% * 1.25 = 7.5%. For July, payroll is $3,600 + 7.5% of $180,000 = $3,600 + $13,500 = $17,100.

Warshaw Company Budgets Payroll at $3,600 Per Month Plus a Percentage