Question

DC Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $86,000 annually and one salaried estimator who is paid $48,000 annually. The corporate office has two office administrative assistants who are paid salaries of $52,000 and $38,000 annually. The president's salary is $156,000. How much of these salaries are common fixed expenses?

Answer 1

The common fixed expenses = $246,000

Step-by-step explanation:

Common fixed expenses are those costs that do not change with change in production volume, are not limited to a single segment of a business. In this example for a company with two divisions: Remodeling and new home construction, the administrative assistants' and president's salaries are fixed, because their annual salaries remain the same irrespective of the number of clients gotten during the year, and it is common because these two sectors (administration and presidency) are not directly traceable to any of the two divisions of the company, they are generally involved.

Therefore, the common fixed expenses are the salaries of the administrative assistants and the president which are:

Common fixed cost = 52,000 + 38,000 + 156,000 = $246,000