ECONOMICS

Detailed explanation-1: -Answer: A company has to pay a 10, 000 per unit royalty to the designer of a product which manufactures and sells the royalty charge would be classified as (c.) direct expenses.

Detailed explanation-2: -The royalty expense incurred by the Company is classified as a general and administrative expense on the Company’s consolidated statements of operations in accordance with the accounting guidance of ASC 605-45-45, Principal Agent Considerations, and ASC 705, Cost of Sales and Services.

Detailed explanation-3: -Royalty rate over gross sales, is about 10% to 25% profit margin based on industry, higher in industries where the intellectual property is significantly more complicated and less in simpler creative work. The royalty rate thus usually is between 1 to 20 percent.

Detailed explanation-4: -Royalty on production is a direct expenses and to be debited to the manufacturing/trading account.