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Chapter 20: 20-11QS (page 914)

X-Tel budgets sales of \(60,000 for April, \)100,000 for May, and \(80,000 for June. In addition, sales commissions are 10% of sales dollars and the company pays a sales manager a salary of \)6,000 per month. Sales commissions and salaries are paid in the month incurred. Prepare a selling expense budget for April, May, and June.

Short Answer

Expert verified

The selling expense budget for the month of April, May and June will be $12,000, $16,000 and $14,000.

Step by step solution

01

Given the information as

Particulars

Amount

Budgeted sales for April

$60,000

Budgeted sales for May

$100,000

Budgeted sales for June

$80,000

Sales commission

10%

Managers monthly salary

$6,000 per month

02

Preparation of selling expense budget for the month of April, May and June

X-Tel

Selling expense budget

For the month of April, May and June

Particulars

April

May

June

Budgeted sales

$60,000

$100,000

$80,000

Sales commission @10% of sales

$6,000

$10,000

$8,000

Add: Monthly salary

$6,000

$6,000

$6,000

Total budgeted selling expense

$12,000

$16,000

$14,000

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Most popular questions from this chapter

Google prepares a cash budget. What is a cash budget? Why must operating budgets and the capital expenditures budget be prepared before the cash budget?

Participatory budgeting can sometimes lead to negative consequences. From the following list of outcomes that can arise from participatory budgeting, identify those with potentially negative consequences.

  1. Budgetary slack will not be available to meet budgeted results.
  2. Employees might understate expense budgets.
  3. Employees might commit unethical or fraudulent acts to meet budgeted results.
  4. Employees set sales targets too high.
  5. Employees always spend budgeted amounts, even if on unnecessary items.
  6. Employees might understate sales budgets and overstate expense budgets.

Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash payments for the month and the cash balance expected on July 31.

a. Beginning cash balance on July 1: \(50,000.

b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), \)1,720,000; June (actual), \(1,200,000; and July (budgeted), \)1,400,000.

c. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), \(700,000; and July (budgeted), \)750,000.

d. Budgeted cash payments for salaries in July: \(275,000.

e. Budgeted depreciation expense for July: \)36,000.

f. Other cash expenses budgeted for July: \(200,000.

g. Accrued income taxes due in July: \)80,000.

h. Bank loan interest paid in July: $6,600.

The Guitar Shoppe reports the following sales forecast: August, \(150,000; September, \)170,000. Cash sales are normally 40% of total sales, 55% of credit sales are collected in the month following sale, and the remaining 5% of credit sales are written off as uncollectible. Prepare a schedule of cash receipts for September.

Zilly Co. predicts sales of \(400,000 for June. Zilly pays a sales manager a monthly salary of \)6,000 and a commission of 8% of that month’s sales dollars.

Prepare a selling expense budget for the month of June.
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