# CMA Study Group

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• #### 1.  PART 1 SUM

Posted 13 days ago

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.

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

Posted 13 days ago

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 13 days ago

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 2 days ago
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 13 days ago

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 12 days ago
Hello
could anyone add me to Whats app group Part 1 my exam window May & June

THanks

• #### 7.  RE: PART 1 SUM

Posted 11 days ago
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 13 days ago
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 yesterday

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.