Question

Assume that a manufacturing company incurred the following:

direct labor$ 90,000
advertising$ 45,000
factory supervision$ 35,000
sales commissions$ 15,000
depreciation, office equipment$ 10,000
indirect materials$ 5,000
depreciation, factory building$ 20,000
administrative office salaries$ 1,000utilities,
factory$ 2,500
direct materials$ 105,000
insurance, factory$ 6,000
property taxes, factory$ 7,00
0what is the total fixed selling and administrative cost?

Answer 1

The total fixed selling and administrative cost for the company is $56,000, including advertising, depreciation of office equipment, and administrative office salaries.

Step-by-step explanation:

To calculate the total fixed selling and administrative cost for a manufacturing company, we examine each cost to determine if it is a fixed administrative or a fixed selling cost. Fixed costs are those expenses that do not change with the level of production, such as rent, salaries of administrative staff, and depreciation on office equipment. From the list provided:

• Advertising: $45,000 (selling cost)
• Depreciation of office equipment: $10,000 (administrative cost)
• Administrative office salaries: $1,000 (administrative cost)

By adding these together, the total fixed selling and administrative cost would be $45,000 (advertising) + $10,000 (depreciation, office equipment) + $1,000 (administrative office salaries) = $56,000.

Sales commissions, although they are selling costs, are typically not fixed because they vary with the volume of sales. Similarly, the costs like direct materials, direct labor, and utilities for the factory are related to production and are not fixed selling or administrative costs.