Question

Benson Corporation paid one of its sales representatives $6,000 during the month of March. The rep is paid a base salary plus $13 per unit of product sold. During March, the rep sold 200 units. Required Calculate the total monthly cost of the sales representative's salary for each of the following months: May July April - 240 150 June 250 160 Month Number of units sold Total variable cost Total fixed cost Total salary cost S 0S 0S 0S

Answer 1

1.

Month	April	May	June	July
Number of units sold	240	150	250	160
Total variable cost (no of units sold * $13)	$      3,120.00	$ 1,950.00	$ 3,250.00	$ 2,080.00
Total fixed cost ( see below note)	$      3,400.00	$ 3,400.00	$ 3,400.00	$ 3,400.00
Total salary cost ( Variable cost + fixed cost)	$      6,520.00	$ 5,350.00	$ 6,650.00	$ 5,480.00

Note: Calculation of fixed cost

Salary paid to sales representative = No of unit sold * $13+ basic salary

Amount paid during the month of march = $6,000

No of units sold in the month of march = 200

Variable cost for the month of march = 200*13 = $2,600

Hence, base salary (fixed cost) = $6000 - $2600 = $3,400

2. a) Total product cost is the sum of direct material, direct wages and manufacuring overhead.

Direct material cost = $3,250

Direct wages = $3,460 (This includes only the wages of production workers)

Manufacturing overhead = $5,054 (Depreciation of machinaries used in manucfaturing)

Total product cost for the year = $3,250 + $3,460 + $5,054 = $11,764

Total product cost for the year is $11,764

b) Total cost of ending inventory is $3,808  

Working

Particular	Amount/Units
Total units prodused during the year	1730
Less: Total unit sold during the year	-1170
Closing inventory	560
Total product cost for 1730 units (from sub question (a))	$       11,764.00
Per unit cost (11763/1730)	$                 6.80
Closing inventory (560*$6.80)	$         3,808.00

c) Cost of good sold = Number of good sold*Cost per unit

= 1170*$6.80

= $7,956

Total cost of good sold is $7,956