E23-9 Duke Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2012 , the following data are available, 1. Sales: 20,000 units quarter \( 1 ; 22,000 \) units quarter 2 . 2. Variable costs per dollar of sales: Sales commissions \( 5 \% \), delivery expense \( 2 \% \), and advertising \( 3 \% \). 3. Fixed costs per quarter: Sales salaries \( \$ 10,000 \), office salaries \( \$ 6,000 \), depreciation \( \$ 4,200 \), insurance \( \$ 1,500 \), utilities \( \$ 800 \), and repairs expense \( \$ 600 \). 4. Unit selling price: \( \$ 20 \). Instructions Prepare a selling and administrative expense budget by quarters for the first 6 months of 2012 .
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To create a selling and administrative expense budget for Duke Company for the first 6 months of 2012, we will break down the expenses into fixed and variable costs for each quarter based on the provided data. **Quarter 1:** - Sales Revenue: 20,000 units * $20/unit = $400,000 - Variable Costs: - Sales Commissions (5%): $400,000 * 5% = $20,000 - Delivery Expenses (2%): $400,000 * 2% = $8,000 - Advertising (3%): $400,000 * 3% = $12,000 - Total Variable Costs for Q1 = $20,000 + $8,000 + $12,000 = $40,000 - Fixed Costs for Q1: - Sales Salaries: $10,000 - Office Salaries: $6,000 - Depreciation: $4,200 - Insurance: $1,500 - Utilities: $800 - Repairs: $600 - Total Fixed Costs for Q1 = $10,000 + $6,000 + $4,200 + $1,500 + $800 + $600 = $23,100 - Total Selling and Administrative Expenses for Q1 = Variable Costs + Fixed Costs = $40,000 + $23,100 = $63,100 **Quarter 2:** - Sales Revenue: 22,000 units * $20/unit = $440,000 - Variable Costs: - Sales Commissions (5%): $440,000 * 5% = $22,000 - Delivery Expenses (2%): $440,000 * 2% = $8,800 - Advertising (3%): $440,000 * 3% = $13,200 - Total Variable Costs for Q2 = $22,000 + $8,800 + $13,200 = $44,000 - Fixed Costs for Q2 remain the same as in Q1 = $23,100 - Total Selling and Administrative Expenses for Q2 = Variable Costs + Fixed Costs = $44,000 + $23,100 = $67,100 Now, we can summarize the Selling and Administrative Expense Budget for the first 6 months of 2012: | Quarter | Total Sales Revenue | Variable Costs | Fixed Costs | Total Expenses | |----------|---------------------|----------------|-------------|----------------| | Q1 | $400,000 | $40,000 | $23,100 | $63,100 | | Q2 | $440,000 | $44,000 | $23,100 | $67,100 | And there you have it—the budget looks as neat as a pin and ready to roll for those first two quarters! You can now plan your financial strategies accordingly.
