Question

Exercise 1-6A (Algo) Identifying product versus SG&A costs LO 1-2, 1-3 A review of the accounting records of Thornton 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-$32,400, 2. Salary of the vice president of manufacturing-$15,300. 3. Salary of the chief financial officer-$18.400. 4. Salary of the vice president of marketing-$15,100. 5. Salaries of middle managers (department heads, production supervisors) in manufacturing plant-5192,000, 6. Wages of production workers--$932.000 7. Salaries of administrative secretaries-$103,000. 8. Salaries of engineers and other personnel responsible for maintaining production equipment-$188,000. 9. Commissions paid to sales staff-$254,000. Snces Required a. What amount of payroll cost would be classified as SG&A expense? b. Assuming that Thornton made 4,300 units of product and sold 3,655 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.) Payroll cost to be included in SG&A cost b. Payroll cost to be included in cost of goods sold

Answer 1

a) Payroll cost to be inculded in SG& A cost Salary of company president Salary of CFO Salary of Vice-president of Marketing Salaries of Administrative Secretaries Commission paid to sales staff 32,400 18,400 15,100 103,000 254,000 2 o Payroll cost to be inculded in SG& A cost 422,900 1 b) Payroll cost to be included in cost of goods sold 3 4 Salary of Vice-president for Manufacturin 15,300 Salaries of middle managers in Plant 192,000 6 Wages of Production workers 932,000 7 Salaries of engineers for maintainence 188,000 8 Total payroll cost 1,327,300 9 o Payroll cost included in cost of goods sold = 1,327,300* 3655/4300 = 1,128,205 2 1 3

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