Question

A review of the accounting records of Jordan Manufacturing indicated that the company incurred the following payroll costs during the month of March. Assume the companies financial statements are prepared in accordance with GAAP.

Salary of the company president—$31,300.
Salary of the vice president of manufacturing—$15,700.
Salary of the chief financial officer—$19,100.
Salary of the vice president of marketing—$16,000.
Salaries of middle managers (department heads, production supervisors) in manufacturing plant—$192,000.
Wages of production workers—$941,000.
Salaries of administrative secretaries—$103,000.
Salaries of engineers and other personnel responsible for maintaining production equipment—$177,000.
Commissions paid to sales staff—$259,000.
Required
What amount of payroll cost would be classified as SG&A expense?
Assuming that Jordan made 3,300 units of product and sold 2,805 of them during the month of March, determine the amount of payroll cost that would be included in cost of goods sold. (Do not round intermediate calculations.)

Answer 1

The total SG&A expense is $425,000. Payroll costs included in COGS amount to $1,310,000, and the labor costs to be included in COGS for the units sold are $1,114,545.

Step-by-step explanation:

The amount of payroll cost that would be classified as SG&A (Selling, General, and Administrative) expense includes salaries and wages not directly tied to the production of goods. These include the salary of the company president, vice presidents of manufacturing and marketing, administrators, and sales commissions. The total SG&A expense is the sum of the president's salary ($31,300), the manufacturing vice president ($15,700), the marketing vice president ($16,000), the administrative secretaries ($103,000), and the sales staff commissions ($259,000), amounting to $425,000.

For the second part of the question, the payroll costs included in the cost of goods sold (COGS) are those directly associated with the production of goods. These include the middle managers in the manufacturing plant, production workers, and engineers and other personnel responsible for maintaining production equipment. Therefore, the total payroll cost included in COGS is the sum of the middle managers' salaries ($192,000), production workers' wages ($941,000), and maintenance personnel salaries ($177,000), totaling $1,310,000. When calculating the cost per unit, this amount is divided by the number of units made, and then multiplied by the number of units sold (1,310,000 / 3,300 * 2,805), giving us a cost of $1,114,545 related to labor to be included in cost of goods sold.