DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $167,300 to $202,400. Variable costs and their percentage relationship to sales are: Sales Commissions 6%, Advertising 5%, Traveling 3%, and Delivery 2%. Fixed selling expenses will consist of Sales Salaries $34,721, Depreciation on Delivery Equipment $6,948, and Insurance on Delivery Equipment $1,115. Prepare a monthly flexible budget for each $11,700 increment of sales within the relevant range for the year ending December 31, 2014 Solution Flexible Budget for year ending December 31, 2014 Sales $        167,300 $        179,000 $        190,700 $        202,400 Less: Variable expenses Sales Commission (6% of sales) $          10,038 $          10,740 $          11,442 $          12,144 Advertising (5% of sales) $            8,365 $            8,950 $            9,535 $          10,120 Traveling (3% of sales) $            5,019 $            5,370 $            5,721 $            6,072 Delivery (2% of sales) $            3,346 $            3,580 $            3,814 $            4,048 Contribution = Sales - Total variable expenses $        140,532 $        150,360 $        160,188 $        170,016 Less: Fixed expenses Sales salaries $          34,721 $          34,721 $          34,721 $          34,721 Depreciation on delivery equipment $            6,948 $            6,948 $            6,948 $            6,948 Insurance on delivery equipment $            1,115 $            1,115 $            1,115 $            1,115 Net Budgeted Income = Contribution - Total fixed expenses $          97,748 $        107,576 $        117,404 $        127,232 .

1. DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are
expected to range from $167,300 to $202,400. Variable costs and their percentage relationship to
sales are: Sales Commissions 6%, Advertising 5%, Traveling 3%, and Delivery 2%. Fixed
selling expenses will consist of Sales Salaries $34,721, Depreciation on Delivery Equipment
$6,948, and Insurance on Delivery Equipment $1,115.
Prepare a monthly flexible budget for each $11,700 increment of sales within the relevant range
for the year ending December 31, 2014
Solution
Flexible Budget for year ending December 31, 2014 Sales $ 167,300 $ 179,000 $
190,700 $ 202,400 Less: Variable expenses Sales Commission (6% of sales) $ 10,038
$ 10,740 $ 11,442 $ 12,144 Advertising (5% of sales) $ 8,365 $
8,950 $ 9,535 $ 10,120 Traveling (3% of sales) $ 5,019 $ 5,370
$ 5,721 $ 6,072 Delivery (2% of sales) $ 3,346 $ 3,580 $
3,814 $ 4,048 Contribution = Sales - Total variable expenses $ 140,532 $
150,360 $ 160,188 $ 170,016 Less: Fixed expenses Sales salaries $ 34,721 $
34,721 $ 34,721 $ 34,721 Depreciation on delivery equipment $ 6,948 $
6,948 $ 6,948 $ 6,948 Insurance on delivery equipment $ 1,115 $
1,115 $ 1,115 $ 1,115 Net Budgeted Income = Contribution - Total fixed expenses
$ 97,748 $ 107,576 $ 117,404 $ 127,232