Question

King Company has provided the following average cost per unit information: Direct materials $ 12.00 Direct labor $ 8.00 Variable manufacturing overhead $ 1.00 Fixed manufacturing overhead $ 7.00 Fixed selling expenses $ 3.00 Fixed administrative expenses $ 6.00 Sales commissions $ 2.00 Variable administrative expenses $ 1.00 Total fixed selling expenses are allocated as follows: $40,000 on promotions and the remainder on sales salaries If King Company uses sales representatives as the cost object and sells 30,000 units, direct selling expenses are Blank 1 and indirect selling expenses are Blank 2.

Answer 1

At First, Let me Explain both the terms Direct & Indirect Selling Expenses.

Direct Selling Expenses are Direct expenses only occur when the product is sold and include shipping supplies, delivery charges and sales commissions.

                                             Whereas

Indirect Indirect Expenses are the costs that occur throughout the manufacturing process and after the product is finished. An item does not have to be sold for an indirect expense to be incurred. This can be considered money spent to earn sales. Indirect expenses include product advertising, promotions and marketing, telephone bills, travel costs and the salaries of sales personnel.

Now in this Problem, Fixed Selling Expenses = 30,000 x $ 3 = $ 90,000

out of which on promotion = $ 40,000 and balance on Sales Salaries = $ (90,000-40,000)= $ 50,000

Now, We have to find out Direct Selling Expenses.

As we know sales commission is a part of Direct Selling Expenses.

Hence Direct Selling Expenses = 30,000 x $ 2 = $ 60,000

Now, We have to find out Indirect Selling Expenses,

As we know Slaes promotion and Sales Salay both are part of Indirect Selling Expenses,

Hence, Indirect Selling Expenses = $ (40,000+50,000)= $90,000.