The following budget information is available for Crescent Company for January Year 2: Sales $ 800,000 Cost of goods sold 540,000 Utilities expense 2,500 Administrative salaries 100,000 Sales commissions 5 % of Sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 Percentage of sales on credit 80 % All operating expenses are paid in cash in the month incurred. The amount of expected cash outflow for selling and administrative expenses would be: $232,500
To calculate the amount of expected cash outflow for selling and administrative expenses, the following calculation is made:
The computation of the amount of expected cash outflows for selling and admin expenses is shown below:
Utilities expense $2,500
Administrative salaries $100,000
Sales commission ($800,000 × 5%) = $40,000
Advertising $20,000
Rent on administrative building $60,000
Miscellaneous administrative expenses $10,000
Total budgeted cash sales and administrative expenses $232,500
Therefore, the correct answer is as given above
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The complete question goes thus:
The following budget information is available for Crescent Company for January 2014: Sales $ 800,000 Cost of goods sold 540,000 Utilities expense 2,500 Administrative salaries 100,000 Sales commissions 5 % of Sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 Percentage of sales on credit 80 % All operating expenses are paid in cash in the month incurred. The amount of expected cash outflow for selling and administrative expenses would be: Multiple Choice $312,500. $262,500. $232,500
