Reference no: EM132603387
The Wilson Company wants you to prepare flexible budget for selling and administrative expenses. The general manager and the sales manger have met with all the department heads, and they have provided you either the following information regarding selling and administrative expenses:
1. The company presently employs 30 full-time salespersons with a base salary of $300 each per month plus commissions and 10 full-time salespersons with a salary of $500 each per month plus commissions. In addition, the company employs nine regional sales managers with a salary of $1,800 per month, none of whom is entitled to any commissions.
2. If sales volume exceeds $7,500,000 per year, the company will need to hire four more salespersons, each at a salary of $300 per month plus commissions.
3. Sales commissions are either 10% or 5% of the selling price, depending on the product sold. Typically, a 10% commission applies on 60% of sales, and a 5% commission applies on the remaining 40% of sales.
4. Salesperson's travel allowances average $125 per month per salesperson (excluding managers)
5. Advertising expenses average $25,000 per month plus 5% of sales.
6. Selling supplies expense is estimated at 1% of sales.
7. Administrative salaries are $25,000 per month.
8. Other administrative expenses include the following:
Rent-$4,000 per month
Office supplies- 2% of sales
Other administrative expenses (telephone, etc)-$1,000 per month
Required:
Question 1: Construct flexible budget for selling and administrative expenses for sales volumes of $6 million, $8 million, and $10 million per year.