Asked by Elizabeth Candelmo on Jun 05, 2024
Verified
The selling and administrative expense budget of Choo Corporation is based on budgeted unit sales, which are 4,600 units for August. The variable selling and administrative expense is $7.30 per unit. The budgeted fixed selling and administrative expense is $51,980 per month, which includes depreciation of $6,440 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the August selling and administrative expense budget should be:
A) $85,560
B) $45,540
C) $79,120
D) $33,580
Selling and Administrative Expense
Overheads related to the selling of products and the management of an organization.
Variable
An element, feature, or factor that is liable to vary or change.
Fixed
Pertains to expenses that remain constant for a given period regardless of the level of production or business activity.
- Examine and compute variable and fixed costs in the process of budgeting.
Verified Answer
KP
Khushi PatelJun 06, 2024
Final Answer :
C
Explanation :
Variable selling and administrative expense per unit = $7.30
Budgeted unit sales for August = 4,600 units
Total variable selling and administrative expense = $7.30 x 4,600 = $33,580
Fixed selling and administrative expense (excluding depreciation) = $51,980 - $6,440 = $45,540
Total selling and administrative expense budget for August = Total variable selling and administrative expense + Fixed selling and administrative expense = $33,580 + $45,540 = $79,120
Therefore, the cash disbursements for selling and administrative expenses on the August budget should be $79,120. Hence, the correct choice is C.
Budgeted unit sales for August = 4,600 units
Total variable selling and administrative expense = $7.30 x 4,600 = $33,580
Fixed selling and administrative expense (excluding depreciation) = $51,980 - $6,440 = $45,540
Total selling and administrative expense budget for August = Total variable selling and administrative expense + Fixed selling and administrative expense = $33,580 + $45,540 = $79,120
Therefore, the cash disbursements for selling and administrative expenses on the August budget should be $79,120. Hence, the correct choice is C.
Learning Objectives
- Examine and compute variable and fixed costs in the process of budgeting.