A company has provided the following average cost per unit information: Direct m
ID: 2394796 • Letter: A
Question
A company has provided the following average cost per unit information:
Direct materials
$30.00
Direct labor
$20.00
Variable manufacturing overhead
$5.00
Fixed manufacturing overhead
$8.00
Fixed selling expenses
$6.00
Fixed administrative expenses
$7.00
Sales commissions
$4.00
Variable administrative expenses
$3.00
Total fixed selling expenses are allocated as follows:
$125,000 on promotions and the remainder on sales salaries
If the company uses sales representatives as the cost object and sells 50,000 units, direct selling expenses are and indirect selling expenses are .
You must format your answers as follows: $x,xxx
Direct materials
$30.00
Direct labor
$20.00
Variable manufacturing overhead
$5.00
Fixed manufacturing overhead
$8.00
Fixed selling expenses
$6.00
Fixed administrative expenses
$7.00
Sales commissions
$4.00
Variable administrative expenses
$3.00
Explanation / Answer
Total fixed selling expenses for 50,000 units are $6 x 50,000 = $300,000
Promotion Expense = $125,000
Sales Salaries = $300,000 - $125,000 = $175,000
If the company uses sales representatives as the cost object and sells 50,000 units,
Direct Selling Expenses = Fixed Salary + Variable Sales Commission = $175,000 + (50,000 x $4) = $375,000
Indirect Selling Expenses = Promotion Expense = $ 125,000
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