Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales.The June operating expenses 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.
The total operating expenses budgeted for July are

Question

Quizplus · Accepted Answer

C)
Inventory $95,000 10% = $9,500 Office and Adm.Expense
Total Payroll $13,200
- fixed payroll -3,600
= variable payroll = $9,600 divided by Sales = 6% (payroll as a % of Sales)
Now: $180,000 × 6% = $10,800 Variable Payroll
+ 3,600 Fixed
= $14,400 Total Payroll
Final Payroll $14,400
+ Office and Adm.expense 9,500
+ Depreciation 1,000
+ Insurance 600
= Total Operating Expense $25,500

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