Food King gathered the following information for the fourth quarter of 20X9: Budgeted sales for October $25,000 Monthly Expenses: Salary expense $1,500 Rent expense $1,000 Depreciation expense $400 Sales commissions 10% of sales Advertising expense 8% of sales Miscellaneous expense 5% of sales Monthly sales are expected to increase by 5% each month. Prepare an operating expense budget for the fourth quarter (for three separate months) of 20X9.

Answer and Explanation:

The presentation of the operating expense budget is presented below:

Particulars            October       November     December      

Budgeted sales    $25,000      $26,250        $27,562.5

                                            ($25,000 × 1.05)  ($26,250× 1.05)

Salary Expense     $1,500           $1,500         $1,500              

Rent expense       $1,000            $1,000         $1,000              

Depreciation

expense               $400                $400          $400              

Sales Commission $2,500           $2,625     $2,756

                         ($25,000 ×10%)   ($26,250 × 10%) ($27,562.50 × 10%)

Advertising expense $2,000       $2,100      $2,205

                ($25,000 ×8%)   ($26,250 × 8%) ($27,562.50 × 8%)

Miscellaneous expense $1,250    $1,312.5    $1,378

         ($25,000 ×5%)   ($26,250 × 5%) ($27,562.50 × 5%)

Total Monthly expenses $8,650   $8,937.5  $9,239

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