Warshaw Company is preparing the June Budget. The June budget includes the following dа ta: Sales $100,000 Purchases of Merchandise $95,000 Depreciation of office equipment in Accounting Department $2378 Insurance $11314 Payroll expenses $5234 a month plus 2% of sales (for sales and administrative personnel) Administrative office expenses incurred to order purchases are budgeted at 4% of purchases of merchandise only Purchase of equipment $4650 Research and Development 8% of sales What is total operating expense for June?

total operating expense is $32726

Explanation:

Given data

Sales = $100,000

Purchases of Merchandise = $95,000

Depreciation in Accounting Department = $2378

Insurance = $11314

Payroll expenses = $5234 + 2% sales = 5234 + 2000 = $7234

Administrative office expenses = 4% of purchases of merchandise = 0.04*95000 = $3800

Research and Development = 8% of sales = 0.08*100000 = $8000

Purchase of equipment = $4650

to find out

total operating expense for June

solution

we will find total operation expense that will be equal to sum of depreciation, insurance, payroll expenses and admin and Research and Development expenses

so

we know

total operating expense for June = Depreciation + Insurance + Payroll expense + Administrative office expenses + Research and Development expense

total operating expense = 2378 + 11314 + 7234 + 3800 + 8000

total operating expense is $32726