A review of the accounting records of Baird Manufacturing indicated that the company incurred the following payroll costs during the month of March. Assume the companies 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.)

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

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

= 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 first we have to determine the total cost which is shown 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

anthougo anthougo · Answer 2 · 2021-11-18T17:18:25+01:00

a) The amount of payroll cost classified as SG&A expenses is $413,000.

b) The total payroll cost included in the cost of goods sold is $787,200.

Data and Calculations:

1. Salary (company president) = $75,000

2. Salary (vice president of manufacturing) = $50,000

3. Salary (chief financial officer) = $42,000

4. Salary (Vice president of marketing) = $40,000

5. Salaries (Manufacturing Plant Managers) = $147,000

6. Wages of production workers = $703,500

7. Salaries (administrative secretaries) = $60,000

8. Salaries (production equipment maintenance) =$133,500

9. Sales Commissions = $146,000

a) The amount of payroll cost classified as SG&A expenses:

1. Salary (company president) = $75,000

2. Salary (vice president of manufacturing) = $50,000

3. Salary (chief financial officer) = $42,000

4. Salary (Vice president of marketing) = $40,000

7. Salaries (administrative secretaries) = $60,000

9. Sales Commissions = $146,000

Total = $413,000

Production Payroll Costs:

Factory direct labor costs:

6. Wages of production workers = $703,500

Factory indirect labor costs:

5. Salaries (Manufacturing Plant Managers) = $147,000

8. Salaries (production equipment maintenance) $133,500

Total Payroll costs for production = $984,000

Production units = 5,000

Payroll cost per unit = $196.80 ($984,000/5,000)

Sales units = 4,000

Amount of payroll cost in cost of goods sold = $787,200 (4,000 x $196.80)

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