Lapp Manufacturing Uses Flexible Budgets to Control Its Selling Expenses

question 89

Essay

Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $400000 to $480000. Variable costs and their percentage relationships to sales are: $$\begin{array} { l l } \text { Sales commissions } & 6 \% \\\text { Advertising } & 4 \% \\\text { Traveling } & 5 \% \\\text { Delivery } & 1 \%\end{array}$$ Fixed selling expenses consist of sales salaries $80000 and depreciation on delivery equipment $20000.
Instructions
Prepare a flexible budget for increments of $40000 of sales within the relevant range.

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Definitions:

Overhead Applied

The amount of overhead costs allocated to a particular cost object, such as a product, based on predetermined overhead rates.

Machining Department

A specific section within a manufacturing facility where machining operations are performed to produce parts.

Machine-Hours

A measure of the amount of time machines are used in the production process, often used as a basis for allocating overhead costs.

Overhead Applied

The portion of overhead costs allocated to a specific job or project based on a predetermined rate.