Question

A review of the accounting records of Perez Manufacturing indicated that the company incurred the following payroll costs during the month of March. Assume the company's financial statements are prepared in accordance with GAAP.1. Salary of the company president—$75,000.

2. Salary of the vice president of manufacturing—$50,000.
3. Salary of the chief financial officer—$42,000.
4. Salary of the vice president of marketing—$40,000.
5. Salaries of middle managers (department heads, production supervisors) in manufacturing plant—$147,000.
6. Wages of production workers—$703,500.
7. Salaries of administrative secretaries—$60,000.
8. Salaries of engineers and other personnel responsible for maintaining production equipment—$133,500.
9. Commissions paid to sales staff—$146,000.
Required
a. What amount of payroll cost would be classified as SG&A expense?
b. Assuming that Baird made 5,000 units of product and sold 4,000 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

a. $363,000

b. $827,200

Step-by-step explanation:

The calculations are given below:

a. Payroll cost is

= Salary of the company president + Salary of the chief financial officer + Salary of the vice president of marketing + Salaries of administrative secretaries + Commissions paid to sales staff

= $75,000 + $42,000 + $40,000 + $60,000 + $146,000

= $363,000

And, for computing payroll cost included in the cost of goods sold first we have to find out the total cost i.e given below:

= Salary of the vice president of manufacturing + Salaries of middle managers (department heads, production supervisors) in manufacturing plant + Wages of production workers + Salaries of engineers and other personnel responsible for maintaining production equipment

= $50,000 + $147,000 + $703,500 + $133,500

= $1,034,000

Now the cost of goods sold would be

= Total cost × sales units ÷ number of units produced

= $1,034,000 × 4,000 units ÷ 5,000 units

= $827,200