For February, Jim’s Jeans recognized $40,000 in revenue, with a selling commission to its marketing personnel of 5%. The manager of the department is the only employee in this department with a salary, and he makes $48,000 per year. Jim had advertising expenses of $5,000, along with miscellaneous selling expenses of $2,000. What was the total selling/marketing expense for February?
Explanation
Answer - C - The total selling expense for February was $13,000, which includes all associated expenses. Revenue is not factored in, except for the calculation of commission. The total selling expense includes all associated expenses with some numbers requiring calculations:
Commission: 40,000 x .05 = 2,000
Salary: 48,000 / 12 = 4,000
Advertising Expense: 5,000
Miscellaneous Expense: $2,000
Total: 13,000
Key Takeaway: Expenses within a category factor in salaries, specific expenses, and commissions. Often, those numbers will need to be calculated from the information given. Read the question carefully. For example, with salaries, if months are referenced, the salaries will often need to be divided to come up with the monthly expense.
