CMA Study Group

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  • 1.  PART 1 SUM

    Posted 05-26-2023 09:22 AM

    Hi all, can someone help me with the following question? I think the answer should be 298,000 but my study partner suggests that it should be option D.

    A company sells a single product and its sales staff earns a commission of $20 per unit. It costs $15 to ship each unit, and a $5 promotional catalog is sent with each item. The cost of goods sold is budgeted at $30 per unit. The company's fixed manufacturing overhead is budgeted at $45,000 per month. The budget for executive salaries is $40,000 per month, and the base salaries for the sales staff is $22,000. Other monthly expenses include advertising of $15,000, office rent of $10,000,
    office equipment depreciation of $8,000, and $3,000 of other administrative expense. If the company budgets its November sales at 5,000 units, what would be the total sales and administrative expense budget?
    a. $298,000.
    b. $343,000.
    c. $448,000.
    d. $493,000.

    Thank you in advance.



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    Manasi Paralkar
    None
    Virar West MH
    India
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  • 2.  RE: PART 1 SUM

    Posted 05-27-2023 02:16 AM

    to calculate the total sales and administrative expense budget, we need to consider the various expenses involved.

    Sales Expenses: Sales staff commission: $20 per unit * 5,000 units = $100,000 Shipping cost: $15 per unit * 5,000 units = $75,000 Promotional catalog cost: $5 per unit * 5,000 units = $25,000

    Administrative Expenses: Cost of goods sold: $30 per unit * 5,000 units = $150,000 Fixed manufacturing overhead: $45,000 Executive salaries: $40,000 Base salaries for sales staff: $22,000 Advertising: $15,000 Office rent: $10,000 Office equipment depreciation: $8,000 Other administrative expense: $3,000

    Now let's calculate the total sales and administrative expense budget:

    Total sales expenses = Sales staff commission + Shipping cost + Promotional catalog cost = $100,000 + $75,000 + $25,000 = $200,000

    Total administrative expenses = Cost of goods sold + Fixed manufacturing overhead + Executive salaries + Base salaries for sales staff + Advertising + Office rent + Office equipment depreciation + Other administrative expense = $150,000 + $45,000 + $40,000 + $22,000 + $15,000 + $10,000 + $8,000 + $3,000 = $293,000

    Therefore, the total sales and administrative expense budget would be $200,000 + $293,000 = $493,000.

    So, the correct option is:

    d. $493,000.



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    Nuthan Acha
    Student
    Korutla
    India
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  • 3.  RE: PART 1 SUM

    Posted 05-27-2023 02:27 AM

    Apologies for the confusion.  the cost of goods sold is not considered an administrative expense. It is a cost directly associated with the production or purchase of the goods being sold.

    To calculate the correct total sales and administrative expense budget, we need to exclude the cost of goods sold from the administrative expenses.

    Sales Expenses: Sales staff commission: $20 per unit * 5,000 units = $100,000 Shipping cost: $15 per unit * 5,000 units = $75,000 Promotional catalog cost: $5 per unit * 5,000 units = $25,000

    Administrative Expenses: Fixed manufacturing overhead: $45,000 Executive salaries: $40,000 Base salaries for sales staff: $22,000 Advertising: $15,000 Office rent: $10,000 Office equipment depreciation: $8,000 Other administrative expense: $3,000

    Total sales expenses = Sales staff commission + Shipping cost + Promotional catalog cost = $100,000 + $75,000 + $25,000 = $200,000

    Total administrative expenses = Fixed manufacturing overhead + Executive salaries + Base salaries for sales staff + Advertising + Office rent + Office equipment depreciation + Other administrative expense = $45,000 + $40,000 + $22,000 + $15,000 + $10,000 + $8,000 + $3,000 = $143,000

    Therefore, the total sales and administrative expense budget would be $200,000 + $143,000 = $343,000.

    So, the correct option is:

    b. $343,000.



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    Nuthan Acha
    Student
    Korutla
    India
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  • 4.  RE: PART 1 SUM

    Posted 06-06-2023 05:19 AM
    Hi

    Option A is the correct one.  Firstly we need to understand the question well.  It is all about Sales and Administration expenses (overhead) for the month of November.  Why would the Cost of Goods sold be included in the SA OH in the first place?. Focus on variable and Fixed S&A OH and the product of variable cost per unit comes to $40 as multiplied by 5000 units with all fixed OH except Fixed Mfg OH comes to $98000 with overall budget comes to $298000.

    L.Muralidharan
    6383228202
    Chennai





  • 5.  RE: PART 1 SUM

    Posted 05-27-2023 02:51 AM

    2.98 is correct as COGS and Manufacturing Expense will not be added to Sales and Administrative Expenses



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    Manish Tekriwal
    Director/Manager
    NAVI MUMBAI MH
    India
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  • 6.  RE: PART 1 SUM

    Posted 05-28-2023 03:52 AM
    Hello 
    could anyone add me to Whats app group Part 1 my exam window May & June 

    THanks





  • 7.  RE: PART 1 SUM

    Posted 05-29-2023 12:30 AM
    Answer: D 4 is correct (39700+70,000)+ 4300= 114000
    Units = 27000+ 3000(50%)=28500
    = 114,000/28500=4






  • 8.  RE: PART 1 SUM

    Posted 05-27-2023 03:39 AM
    Hi
    My suggestion is the answer C,
    All expenses except the monthly OH because already included in COGS .
    Hope any one can help more


    Sent from my iPhone




  • 9.  RE: PART 1 SUM

    Posted 06-08-2023 04:08 AM

    Hi,

    The question specifically asked for the selling and admin expenses, in other words you should only look up for the period costs not the product cost (according to absorption). And this shall exclude the COGS.

    answer is (A)



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    AHMED M. K. ALMADHOUN
    Accountant
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  • 10.  RE: PART 1 SUM

    Posted 06-10-2023 11:48 AM

    I agree that the answer is $298,000.

    The question specifically asked for selling and administrative expenses. This means to exclude product costs such as the COGs and any overhead costs. 



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    Shaneiker Andrews
    Other
    New Providence
    Bahamas
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