Seattle Products estimates that it will incur the following selling expenses next period:
Salaries (fixed) .................................................................................... $ 20,000
Commissions (0.05 of sales revenue)...................................................... 17,875
Travel (0.03 of sales revenue) ................................................................ 10,725
Advertising (fixed).................................................................................. 50,000
Sales Office Costs ($4,000 plus $0.05 per unit sold) ................................7,250
Shipping Costs ($0.10 per unit sold) ......................................................... 6,500
Total Selling Expenses ........................................................................ $112,350

a. Derive the cost equation for selling expenses.
b. Assume that Seattle sells 50,000 units during the period. Budgeted sales totaled 65,000 units at a budgeted sales price of $5.50 per unit. Prepare a variance report to show the difference between the master budget and the flexible budget.