Smith, Inc., sells tire rims. Its sales budget and inventory, purchases, and cost of goods sold budget for the nine months ended September 30, 2024, follow: (Click the icon to view the sales budget and inventory, purchases, and cost of goods sold budget.) Smith’s selling and administrative expenses include the following: (Click the icon to view the expenses.) Prepare a selling and administrative expense budget for each of the three quarters of 2024 and totals for the nine-month period.
Smith, Inc. Selling and Administrative Expense Budget Nine Months Ended September 30, 2024
Quarter Ended March 31 June 30 September 30 Nine-month Total
Variable expenses: Total variable expenses
Fixed expenses: Total fixed expenses
Total selling and administrative expenses
Reference
The Correct Answer and Explanation is:
To provide a complete and accurate Selling and Administrative Expense Budget for Smith, Inc. for the nine months ended September 30, 2024, I need the sales budget and the breakdown of variable and fixed selling and administrative expenses (including cost behavior details). However, since you mentioned “Click the icon to view,” it seems you are referring to a file or textbook figure, which I currently cannot see.
That said, I will outline a template and explain how to compute the numbers, assuming typical structures for such a budget.
Smith, Inc. – Selling and Administrative Expense Budget
Nine Months Ended September 30, 2024
| Quarter Ended | March 31 | June 30 | Sept. 30 | Nine-month Total |
|---|---|---|---|---|
| Variable Expenses | ||||
| % of Sales (e.g., 10%) | $X | $Y | $Z | $X+Y+Z |
| Total Variable Exp. | $X | $Y | $Z | $TotalVar |
| Fixed Expenses: | ||||
| Salaries | $A | $A | $A | $A×3 |
| Rent | $B | $B | $B | $B×3 |
| Depreciation | $C | $C | $C | $C×3 |
| Other Fixed Costs | $D | $D | $D | $D×3 |
| Total Fixed Exp. | $F1 | $F1 | $F1 | $F1×3 |
| Total S&A Exp. | $X+F1 | $Y+F1 | $Z+F1 | Grand Total |
Explanation (Approx. 300 Words)
A selling and administrative (S&A) expense budget is part of a master budget and outlines the expected costs for operating the business (excluding production). It typically includes both variable and fixed expenses.
Variable selling and administrative expenses change with the level of sales. For example, if Smith, Inc. expects 10% of sales to be variable S&A costs, and the sales for the quarter ending March 31 are $300,000, then the variable expenses would be 10% × $300,000 = $30,000.
Fixed expenses, on the other hand, remain constant regardless of the sales level and are often spread evenly across quarters. Examples include salaries, rent, insurance, and depreciation. If monthly salaries total $10,000, then quarterly fixed salary expenses would be $30,000.
Each quarter’s total S&A expenses are the sum of variable and fixed expenses. To calculate the nine-month total, add the expenses from all three quarters.
This budget is important because it helps management plan cash needs, control operating costs, and assess profitability. Fixed costs, though unchanging in the short term, can become burdensome if sales volume drops unexpectedly. Variable costs allow more flexibility since they scale with activity.
If you can upload or paste the specific sales budget and S&A expenses, I can fill in the exact figures in the budget and give a precise answer.