Comma CoMakes and Sells Widgets Expenses Are Paid in the Month Incurred

question 64

Multiple Choice

Comma Co.makes and sells widgets.The company is in the process of preparing its selling and administrative expense budget for the month.The following budget data are available: $\begin{array}{lcr} \underline{ \text {tem }} &\underline{ \text { Variable Cost Per Unit Sold }} &\underline{ \text { Monthly Fixed Cost }} \\\text { Sales commissions } & \$ 1 & \$ 10,000 \\\text { Shipping } & \$3 & \\\text { Advertising } & \$4 & \\\text { Executive salaries } & & \$120,000\\\text { Depreciation on office equipment } & & \$4,000\\\text { Other }&\$2&\$6,000\end{array}$
Expenses are paid in the month incurred.If the company has budgeted to sell 80000 widgets in October how much is the total budgeted selling and administrative expenses for October?

• A)$940000
• B)$140000
• C)$930000
• D)$800000

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Definitions:

Profitability Ratios

Those ratios—gross profit rate, return on sales, return on total assets, and return on common stockholders’ equity—which measure a company’s ability to earn a profit.

Liquidity Ratios

The two ratios—current ratio and acid test ratio—which measure a company’s ability to pay off short-term debts.

Debt Management

The process of overseeing and controlling an individual's or organization's debt load through various strategies and planning.

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (or assets, liabilities, and equity) is represented as a proportion of the total account.