Question

A review of the accounting records of Solomon 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.
Salary of the company president—$31,300.
Salary of the vice president of manufacturing—$16,300.
Salary of the chief financial officer—$19,600.
Salary of the vice president of marketing—$14,600.
Salaries of middle managers (department heads, production supervisors) in manufacturing plant—$192,000.
Wages of production workers—$931,000. Salaries of administrative secretaries—$104,000.
Salaries of engineers and other personnel responsible for maintaining production equipment—$177,000.
Commissions paid to sales staff—$260,000.
Required

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

b. Assuming that Baird made 4,700 units of product and sold 3,995 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.)

a. Payroll cost to be included in SG&A cost.

b. Payroll cost to be included in cost of goods sold.

Answer 1

Answer:

1

SG&A expense = 31200+18500+16200+112000+251000= 428900

2

Payroll cost to be included in cost of goods sold=(16300+198000+933000+187000)/3000*2400= 1067440

Answer 2

Answer:

A) Selling, General & Administrative (SG&A) expenses include:

• president's salary $31,300
• chief financial officer's salary $19,600
• marketing vice-president's salary $14,600
• administrative secretaries' salaries $104,000
• sales staffs salaries $260,000
• total $429,500

B) payroll expenses allocated to cost of goods sold:

• manufacturing vice-president's salary $16,300
• production facilities middle manager's salary $192,000
• engineers and other maintenance personnel's salaries $177,000
• production workers' salaries $931,000
• total $1,316,300

payroll costs included in COGS = (total payroll / total units produced) x total units sold = ($1,316,300 / 4,700 units) x 3,995 units = $1,118,855

payroll costs included in COGS = $1,118,855