Answer:
The answer to the question is A.
Explanation:
To start, we differentiate between fixed and variable elements:
Fixed costs:
Advertising costs $20,000
Office costs $12,000
Other expenses $10,000
Variable costs:
Delivery costs $25,000
Commission costs $75,000
Other variable costs $20,000
Total amount $120,000
Next, we find the ratio of variable costs to total sales:
Total selling expense ratio = 120,000/2,500,000 = 0.048
For each of the variable costs:
Delivery costs = 25,000/120,000 = 0.20
Commission costs = 75,000/120,000 = 0.63
Other variable costs = 20,000/120,000 = 0.17
Lastly, for sales amounting to $3,400,000:
Total variable cost = 3,400,000 * 0.048 = $163,200
Commissions = 0.63 * 163,200 = $102,816
