Bigelow Company budgets payroll at $4,000 per month plus a percentage of monthly sales.The June operating expense budget includes total payroll of $12,000 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 July payroll should be budgeted at:

Question

Bigelow Company budgets payroll at $4,000 per month plus a percentage of monthly sales.The June operating expense budget includes total payroll of $12,000 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 July payroll should be budgeted at:

Quizplus · Accepted Answer

To calculate the budgeted payroll for July, we need to first determine how much of the payroll is based on sales:

Percentage of payroll based on sales = Total payroll - Fixed payroll / Total sales
Percentage of payroll based on sales = $12,000 - $4,000 / $160,000
Percentage of payroll based on sales = 5%

Now we need to use this percentage to calculate the payroll for July:

Payroll based on sales = Total sales * Percentage of payroll based on sales
Payroll based on sales = $180,000 * 5%
Payroll based on sales = $9,000

We also need to add in the fixed payroll of $4,000:

Total payroll for July = Payroll based on sales + Fixed payroll
Total payroll for July = $9,000 + $4,000
Total payroll for July = $13,000

Therefore, the budgeted payroll for July should be $13,000, so the best answer is B.

Bigelow Company Budgets Payroll at $4,000 Per Month Plus a Percentage