Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 16

Estimate Sales Revenues

SVI is a large securities dealer. Last year, the company made 150,000 trades with an average commission of $60. Because of the general economic climate, SVI expects trade volume to decline by 15 percent. In addition, employees at a local manufacturing plant have historically constituted 10 percent of SVI’s volume. The plant just closed and all employees have closed their accounts.

Offsetting these factors is the observation that the average commission per trade is likely to increase by 15 percent because trades are expected to be larger in the coming year.

Required

Estimate SVI’s commission revenues for the coming year.

Step 1 of 2

Calculation of budgeted commission revenue for company S is shown below

Thus, budgeted commission revenue for company S is $7,762,500.