Pearl,Inchas Prepared the Operating Budget for the First Quarter of the Year.The

question 109

Multiple Choice

Pearl,Inc.has prepared the operating budget for the first quarter of the year.The company forecast sales of $45,000 in January,$55,000 in February,and $65,000 in March.Variable and fixed selling and administrative expenses are as follows: Variable Expenses:
Power cost (20% of sales)
Miscellaneous expenses: (10% of sales)
Fixed Expenses:
Salaries expense: $6000 per month
Rent expense: $5000 per month
Depreciation expense: $1400 per month
Power cost/fixed portion: $600 per month
Miscellaneous expenses/fixed portion: $1200 per month
Calculate total budgeted selling and administrative expenses for the month of January.

• A) $27,700
• B) $33,700
• C) $13,500
• D) $30,700

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Definitions:

Average Fixed Costs

When the production expenses that stay uniform, regardless of production levels, are divided by the number of goods produced.

Average Total Cost

The total cost of production divided by the total quantity of goods or services produced, representing the average cost per unit of output.

Plant Size

The capacity or physical dimensions of a manufacturing or production facility, influencing its output and scale of operations.

Economies of Scale

Savings achieved by companies because of larger operational volumes, where the cost for each unit produced tends to drop as the scale of production grows.