Fallon 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 6 %, advertising 4 %, traveling 3 %, and delivery 2 %. Fixed selling expenses will consist of sales salaries $ 35,000, 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, 2017.
Prepare flexible budget reports for selling expenses.
E10-17
The South Division of Wiig Company reported the following data for the current year.
Sales $ 3,000,000 Variable costs 1,950,000 Controllable fixed costs 600,000 Average operating assets 5,000,000
Top management is unhappy with the investment center ' s return on investment( ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action.
1. Increase sales by $ 300,000 with no change in the contribution margin percentage.
2. Reduce variable costs by $ 150,000.