Hi Manasi,
you are correct. The SG&A expenses total $298,000.
Variable selling costs:
$20commission+$15 shipping +$5 promotional =$40/unit sold
SG&A budget
Variable costs:
$40/unit * 5,000 units = $200,000
Fixed Costs:
$40,000 salary exec + $22,000 sales staff + $15,000 advertising + $10,000 rent + $8,000 depreciation+ 3,000 other expenses = $98,000
Total SG&A = VC + FC = $200,000 + 98,000 = $298,000
The $30/unit COGS (total COGS $30*5,000 units = $150,000) is not part of SG&A nor is the $45,000 fixed manufacturing overhead which is an inventoriable expense and should be capitalized as inventory on the balance sheet until the unit is sold and expensed through COGS.
I hope this answers your question.
thanks,
Laurence
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Laurence Heraux CMA
Director/Manager
Chula Vista CA
United States
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Original Message:
Sent: 05-26-2023 09:22 AM
From: Manasi Paralkar
Subject: PART 1 SUM
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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