Question

Exercise 10-6 Identifying product versus SG&A costs LO 10-2, 10-3

A review of the accounting records of Franklin 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—$31,800.

2. Salary of the vice president of manufacturing—$15,400.

3. Salary of the chief financial officer—$19,000.

4. Salary of the vice president of marketing—$16,000.

5. Salaries of middle managers (department heads, production supervisors) in manufacturing plant—$187,000.

6. Wages of production workers—$932,000.

7. Salaries of administrative secretaries—$102,000.

8. Salaries of engineers and other personnel responsible for maintaining production equipment—$170,000.

9. Commissions paid to sales staff—$253,000.

Required

1. What amount of payroll cost would be classified as SG&A expense?

2. Assuming that Franklin made 3,000 units of product and sold 2,100 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)	Salary of the company president						31,800
	Salary of the chief financial officer						19,000
	Salary of the vice president of marketing						16,000
	Salaries of administrative secretaries						102,000
	Commission paid to Sales staff						253,000
	payroll cost to be included in SG&A cost						421,800	answer
b)	Salary of the vice president of manufacturing						15,400
	Salary of middle managers ( deptt heads,prd sup) in mfg plant						187,000
	Wages of production workers						932,000
	Salaries of engineers & other personnel responsible						170,000
	Payroll cost to be included in cost of goods sold						1,304,400
	therefore payroll cost to be included in cost of goods sold =						1304,400/3000*2100
							913080	answer