The Prattle Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the company has budgeted to sell 17,000 Debs in January, then the total budgeted variable selling and administrative expenses for January will be:
A)$34,000
B)$39,100
C)$18,700
D)$25,500

Question

The Prattle Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available:  All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the company has budgeted to sell 17,000 Debs in January, then the total budgeted variable selling and administrative expenses for January will be:
A)$34,000 
B)$39,100 
C)$18,700 
D)$25,500

Quizplus · Accepted Answer

Total variable selling and administrative expenses per unit = $0.50 + $1.50 + $0.50 = $2.50
Total budgeted variable selling and administrative expenses for January = Total variable selling and administrative expenses per unit x Budgeted sales volume in January = $2.50 x 17,000 = $42,500
However, $3,400 of this amount is depreciation and is not a cash expense. Therefore, the total budgeted variable selling and administrative expenses for January will be $42,500 - $3,400 = $39,100.

The Prattle Corporation Makes and Sells Only One Product Called