Chapter 10, Problem 6E

Exercise 1-6A Identifying product versus SG&A costs

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.