Warshaw Company budgets payroll at $3000 per month plus a percentage of monthly sales. The June operating expenses budget includes total payroll of $12,600 with budgeted sales of $160,000. Sales for July are budgeted at $100,000 while purchases of inventory for July are budgeted at $1,000,000. Depreciation and insurance for July are estimated at $600 and $900, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2800 in equipment and $1100 in furniture is expected in July. If the percentage of monthly sales used in budgeting payroll increases 15%, what would the total payroll budgeted for July be?

Question

Quizplus · Accepted Answer

The original percentage of monthly sales used in budgeting payroll can be calculated from the June data: $12,600 total payroll - $3,000 fixed payroll = $9,600 variable payroll, which is a percentage of $160,000 sales. The percentage is $9,600 / $160,000 = 6%. For July, with a 15% increase, the new percentage is 6% * 115% = 6.9%. Thus, July's payroll budget is $3,000 fixed + ($100,000 * 6.9%) = $3,000 + $6,900 = $9,900.

Warshaw Company Budgets Payroll at $3000 Per Month Plus a Percentage