WV Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $142,000 annually and one salaried estimator who is paid $76,000 annually. The corporate office has two office administrative assistants who are paid salaries of $80,000 and $52,000 annually. The president's salary is $198,000. How much of these salaries are common fixed expenses?
A) $198,000
B) $330,000
C) $132,000
D) $458,000

Question

Quizplus · Accepted Answer

Common fixed expenses are those that don't vary with the level of production or sales. The salaries of on-site supervisors, salaried estimators, and office administrative assistants are all fixed costs that don't change with the number of projects undertaken by each division. Similarly, the president's salary is a fixed cost not influenced by production or sales. Therefore, the total amount of common fixed expenses is:

$142,000 (on-site supervisor Remodeling) + $142,000 (on-site supervisor New Home Construction) + $76,000 (estimator Remodeling) + $76,000 (estimator New Home Construction) + $80,000 (administrative assistant) + $52,000 (administrative assistant) + $198,000 (president) = $666,000

Out of these salaries, the only common fixed expenses are those that don't change with the level of production or sales. Therefore, the answer is B.

WV Construction Has Two Divisions: Remodeling and New Home Construction