Pallen Company estimated sales of 11,000 units at $40 each, unit cost of goods sold of $22, marketing expense of $65,000, and a 10% commission on each unit sold. Administrative expense is budgeted at $50,000. What is the total selling expense?
a. $65,000
b. $109,000
c. $84,000
d. $44,000
e. $39,000

Question

Pallen Company estimated sales of 11,000 units at $40 each, unit cost of goods sold of $22, marketing expense of $65,000, and a 10% commission on each unit sold. Administrative expense is budgeted at $50,000. What is the total selling expense?
a. $65,000
b. $109,000
c. $84,000
d. $44,000
e. $39,000

BlackTom AI · Accepted Answer

Let's break down what is being asked: the total selling expense for Pallen Company, given the components that are classified as selling expenses.
Option a: $65,000. This would only account for the marketing expense and ignores the commission on sales. Since the question specifies a 10% commission on each unit sold, you cannot stop at $65,000 alone.
Option b: $109,000. This combines marketing expense of $65,000 with the total commissions. The commission per unit is 10% of the selling price per unit: 0.10 × $40 = $4 per unit. With 11,000 units sold, commissions total 11,000 × $4 = $44,000. Adding marketing of $65,000 gives $65,000 + $44,000 = $109,000. Administrative expense is not part of selling expenses, so it is excluded here.
Option c: $84,000. This seems to mix components incorrectly. If one mistakenly adds $65,000 marketing plus some other amount (like $19,000) as commissions, it would not align with the given 10% commission on $40 selling price per unit for 11,000 units, which should yield $44,000 in commissions.
Option d: $44,000. This represents only the commission expense and omits the marketing expense entirely. Since marketing is a selling expense, the total should include both components, not just commissions.
Option e: $39,000. This figure does not correspond to either the marketing expense or the correct commission calculation. It seems to stem from misapplying either the price or the percentage. The correct commissions are $44,000, not $39,000, and marketing remains $65,000, so $39,000 alone is incorrect.
In summary, the accurate calculation for total selling expenses is the sum of marketing expense ($65,000) and total commissions ($44,000), yielding $109,000. The other choices omit or miscompute one or more required components of selling expenses.

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