Chapter 22, Problem 7PSA

a.

To determine

Introduction: Variable selling and administration expense refer to those expenses which are incurred for developing or increasing sales of the manufacturing units. These are very much necessary for generating sales. These expenses are such as salary to administration staff, incentives to sales managers or sales staff, etc.

To determine: Variable selling and administration expenses, Fixed manufacturing overheads, and Fixed selling and administrative expenses.

b.

To determine

Introduction: An income statement refers to a statement of accounts that shows the financial performance of the entity for a particular time period i.e. financial year. The income statement comprises Revenues generated by the entity less all expenses which show the net earnings of the company.

To calculate: The maximum advertising costs that the company can incur while earning the same profit.