Selling and administrative expenses are billed and paid the month after they occur.Selling and administrative expenses have both a fixed and a variable component.The fixed component is a constant $8,000 a month.The variable component equals 5 percent of revenues.Given revenues of $300,000 for January,$350,000 for February,and $400,000 for March,what would be the budgeted selling and administrative expenses that would be paid in March?

Question

Quizplus · Accepted Answer

The variable component of selling and administrative expenses is 5% of revenues.

For January, the variable component would be 5% of $300,000, which is $15,000.

For February, the variable component would be 5% of $350,000, which is $17,500.

And for March, the variable component would be 5% of $400,000, which is $20,000.

So in March, the total selling and administrative expenses would be the fixed component of $8,000 plus the variable component of $20,000, which equals $28,000.

However, since the expenses are billed and paid the month after they occur, the budgeted selling and administrative expenses that would be paid in March would be the expenses for February, which were $8,000 (fixed) plus $17,500 (variable), or $25,500.

Therefore, the best choice is C.

Selling and Administrative Expenses Are Billed and Paid the Month