1. Whitaker Company budgets payroll at $3,000 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $10,500 with budgeted sales of $150,000. Sales for July are budgeted at $165,000, while purchases of inventory for July are budgeted at $85,000.
Depreciation and insurance for July are estimated at $750 and $500, respectively. Expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $3,000 in equipment and $1,200 in furniture is expected in July.
a) The July payroll should be budgeted at what amount?
b) What are the total operating expenses budgeted for July?
c) If the percentage used to budget the variable portion of payroll increased 20%, what is the total payroll budgeted for July?
Given a set of facts regarding a company's payroll and its other operating expenses, this solution illustrates how to compute its total budgeted payroll and total operating expenses for a month.