Ask the Accounting Community

 View Only
  • 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.



    ------------------------------
    Manasi Paralkar
    None
    Virar West MH
    India
    ------------------------------


  • 2.  RE: PART 1 SUM

    Posted 05-28-2023 01:26 AM

    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





    ------------------------------
    Laurence Heraux CMA
    Director/Manager
    Chula Vista CA
    United States
    ------------------------------



  • 3.  RE: PART 1 SUM

    Posted 05-28-2023 07:43 AM

    please explain how you solve this question 



    ------------------------------
    Altayeb Abdulqader
    Chief Financial Officer
    JEDDAH
    Saudi Arabia
    ------------------------------