The selling and administrative expense budget of Choo Corporation is based on budgeted unit sales, which are 4,600 units for August. The variable selling and administrative expense is $7.30 per unit. The budgeted fixed selling and administrative expense is $51,980 per month, which includes depreciation of $6,440 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the August selling and administrative expense budget should be:
a. $45,540
b. $85,560
c. $79,120
d. $33,580

Option (c) is correct.

Explanation:

Given that,

Budgeted unit sales for August = 4,600 units

Variable selling and administrative expense per unit = $7.30 per unit

Budgeted fixed selling and administrative expense = $51,980

Depreciation per month = $6,440

Total variable selling and administrative expense:

= Budgeted unit sales for August × variable selling and administrative expense per unit

= 4,600 × $7.30

= $33,580

Total fixed selling and administrative expense:

= Budgeted fixed selling and administrative expense - Depreciation per month

= $51,980 - $6,440

= $45,540

Total cash disbursements for selling and administrative expenses:

= Total variable selling and administrative expense + Total fixed selling and administrative expense

= $33,580 + $45,540

= $79,120

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