Page 143 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Salary to

Sales Administrative Staff 20,000
Sales force 15,000
Expenses of the sales department
Rent of the building 5,000
Carriage outward 5% on sales
Commission at sales 2%

Agents’ commission 6.5%
The sales during the period were estimated as follows:
` 80,000 including Agents Sales ` 8,000
` 1,00,000 including Agents Sales ` 10,500

Solution:

The most important step is to find out the variable portion of the sales overhead of M/s Sudhir
& Sons.
1. The calculation of salesmen’s commission is on the basis of the sales volume generated
by the salesmen force. The total sales volume consists of two different parts viz. Sales

contributed by the sales force and another one is contribution of the agents. To find out the
sales volume of the sales man, the portion of the agents’ sales volume should be deducted
from the total sales volume.

Sales Force’s/Men’s Volume = Total Sales Volume – Agent’s Sales Volume
Similarly, the agents’ sales volume can be computed.
2. From the early step, the amount of commission is to be computed from the volume of
sales.

3. Carriage outward should be computed on the volume of sales.
Sales Overhead Budget for the Year 2006

` 80,000 ` 1,00,000
Estimated Sales
Level Level
Fixed Overhead
Advertisement on Radio 2,000 2,000
Advertisement on TV 12,000 12,000
Salary to Sales Admin. Staff 20,000 20,000
Salary to Sales force 15,000 15,000
Expenses of the sales dept – Rent 5,000 5,000
Total Sales Fixed Overhead (A) 54,000 54,000
Variable Overhead
Salesmen’s Commission 2% 1,440 10,290
Agents’ Commission 6.5% 520 682.5
Carriage outward 5% 4,000 5,000
Total Variable Overhead (B) 5,960 5682.5
Total Sales overhead(A+B) 59,960 59682.5

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