Question

Exercise 10-6 Identifying product versus SG&A costs LO 10-2, 10-3 A review of the accounting records of Perez 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-$32,000. 2. Salary of the vice president of manufacturing—$15,500. 3. Salary of the chief financial officer—$18,500. 4. Salary of the vice president of marketing-$16,000. 5. Salaries of middle managers (department heads, production supervisors) in manufacturing plant-$195,000. 6. Wages of production workers—$941,000. 7. Salaries of administrative secretaries-$111,000. 8. Salaries of engineers and other personnel responsible for maintaining production equipment-$187,000. 9. Commissions paid to sales staff-$243,000. Required a. What amount of payroll cost would be classified as SG&A expense? b. Assuming that Perez made 3,900 units of product and sold 3,315 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	32000
Salary of the chief financial officer	18500
Salary of the vice president of marketing	16000
Salaries of administrative secretaries	111000
Commissions paid to sales staff	243000
Payroll cost to be included in SG&A cost	420500
b
Salary of the vice president of manufacturing	15500
Salaries of middle managers	195000
Wages of production workers	941000
Salaries of engineers and other personnel	187000
Total product cost	1338500
Payroll cost to be included in cost of goods sold	1137725	=1338500/3900*3315