20,000 units, were as follows.
Costs
Per Unit Total
Variable costs $18.60 $372,000
Step costs 4.25 85,000
Fixed costs 8.80 176,000
Total selling and
administrative costs $31.65 $633,000
25
The variable costs represent sales commissions paid at the rate of 6.2% of sales. The step
costs depend on the number of salespersons employed by the company. In August there
were 17 persons on the sales force. However, two members have taken early retirement
effective August 31. It is anticipated that these positions will remain vacant for several
months. Total fixed costs are unchanged within a relevant range of 15,000 to 30,000
units per month. Tut is planning a sales price cut of 10%, which it expects will increase
sales volume to 24,000 units per month. If Tut implements the sales price reduction, the
total budgeted selling and administrative costs for the month of September would be
a. $652,760.
b. $679,760.
c. $714,960.
d. $759,600.
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