Question

A company has provided the following average cost per unit information: $18.00 $12.00 $3.00 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expenses Fixed administrative expenses Sales commissions $7.00 $2.00 $6.00 $4.00 Variable administrative expenses $5.00 Total fixed selling expenses are allocated as follows: $60,000 on promotions and the remainder on sales salaries If the company uses sales representatives as the cost object and sells 80,000 units, direct selling expenses are and indirect selling expenses are You must format your answers as follows: $X.XXX

Answer 1

Total fixed selling expenses = $2 X 80,000 units = $160,000

Out of $160,000, $60,000 is paid for promotion. Remaining $100,000 is direct selling expense.

Since company uses sales representative as cost object to sell, Sales commission is also direct expense. $4 X 80,000 = $320,000

Direct selling expenses = $100,000 + $320,000 = $420,000

Indirect selling expense = $60,000