The Following Details Have Been Extracted from the Budget of a Merchandiser

question 96

Multiple Choice

The following details have been extracted from the budget of a merchandiser. $$\begin{array} { | l | l | } \hline \text { Rent Expense } & \$ 8,000 \text { per month } \\\hline \text { Depreciation Expense } & \$ 3,500 \text { per month } \\\hline \text { Insurance Expense } & \$ 1,250 \text { per month } \\\hline \text { Miscellaneous Expense } & 2 \% \text { of sales, paid as incurred } \\\hline \text { Commissions Expense } & 10 \% \text { of sales } \\\hline \text { Salaries Expense } & \$ 7,000 \text { per month } \\\hline\end{array}$$ $$\begin{array} { | l | c | c | c | } \hline \text { Dec } & \text { Jan } & \text { Feb } & \text { March } \\\hline \text { Sales } \$ 45,000 & \$ 50,000 & \$ 65,000 & \$ 80,000 \\\hline\end{array}$$ Commission and salaries expenses are paid 50% in the month to which they relate and the balance in the next month.
Rent and miscellaneous expenses are paid as and when they occur. Insurance is prepaid at the beginning of the quarter. Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.

• A) $70,400
• B) $50,500
• C) $75,000
• D) $62,750

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Definitions:

Segment Margin

The amount of profit or loss generated by a particular segment of a business, considering only the revenues and costs directly attributable to the segment.

Absorption Costing

A financial recording technique that incorporates all expenses related to production, such as direct materials, direct labor, and variable as well as fixed manufacturing overhead costs, into the product's cost.

Unit Product Cost

The total cost (direct materials, direct labor, and overhead) assigned to a single unit of product.

Segment CM Ratio

The ratio of a business segment's contribution margin to its sales, indicating the profitability and efficiency of that segment.