Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 31

A company is formulating its marketing expense budget for the last quarter of the year. Sales in units for the third quarter amounted to 4,000; sales volume for the fourth quarter are expected to increase by 10 percent. Variable marketing expenses per unit sold amount to approximately $0.05, paid in cash in month of sale. Fixed marketing expenses per month amount to $10,000 of salaries, $5,000 of depreciation (delivery trucks), and $2,000 of insurance (paid monthly). What is the total budgeted marketing expense for the fourth quarter of the year? What is the estimated cash payment for marketing expenses for the fourth quarter?

Step 1 of 5

1.

Calculation of the estimated marketing expenses for the fourth quarter:

Here the total estimated marketing expense would be the sum of the variable expense which is incurred for the quarter and also the fixed expenses incurred for the quarter.

The calculation of the variable expenses for the 4 ^th quarter:

Hence the total variable expense for the fourth quarter is .