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DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are: Sales Commissions 5%, Advertising 4%, Traveling 3%, and Delivery 2%. Fixed selling expenses will consist of Sales Salaries $34,000, Depreciation on Delivery Equipment $7,000, and Insurance on Delivery Equipment $1,000.
Instructions
Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for the year ending December 31, 2012.
Compute the unit contribution margin for each product. Determine which product should be produced in priority, given the labor constraint, and explain why.
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