Speedy Runner makes running shoes and they are anticipating the incurrence of the following operating expenses during the upcoming year: Cost Sales commission $ 2 per pair of shoes sold Salaries $ 540 comma 000 Shipping expenses $ 5.00 per pair of shoes sold Bad debt expense 1.5% of sales revenue Depreciation on sales vehicles $ 28 comma 000 Advertising $ 20 comma 500 Speedy Runner plans to sell 127 comma 000 pairs of shoes at $100 per pair. What will Speedy Runner budget for cash disbursements related to operating expenses?

The correct answer is $1,449,500.

Explanation:

According to the scenario, the computation of the given data are as follows:

Sales commission = $2 per pair

So, total Sales commission = $2 × total number of pairs = $2 × 127,000

= $254,000

Now, Shipping expense = $5 per pair

So, Total shipping expense = $5 × total number of pairs = $5 × 127,000

= $635,000

So, we can calculate the Budget for cash disbursements by using following formula:

Cash disbursement budget = Total sales commission + Salaries + Total shipping expenses + Advertising

By putting the value, we get

Cash disbursement budget = $254,000 + $540,000 + $635,000 + $20,500

= $1,449,500

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