An income statement for Crandall\'s Bookstore for the firstquarter of the curren
ID: 2446476 • Letter: A
Question
An income statement for Crandall's Bookstore for the firstquarter of the current year is presented below:
Sales
$720,000
Cost of goods sold
504,000
Gross margin
216,000
Selling and administrative expenses:
Selling
$63,000
Administrative
63,000
126,000
Net operating income
$90,000
On average, a book sells for $90. Variable selling expenses are$3 per book, with the remaining selling expenses being fixed. Thevariable administrative expenses are 3% of sales, with theremainder being fixed.
The cost formula for selling and administrative expenses with"X" equal to the number of books sold is:
Y = $80,400 + $78.2 X
Y = $86,400 + $68.7 X
Y = $81,400 + $78.2 X
Y = $80,400 + $68.7 X
Sales
$720,000
Cost of goods sold
504,000
Gross margin
216,000
Selling and administrative expenses:
Selling
$63,000
Administrative
63,000
126,000
Net operating income
$90,000
Explanation / Answer
Hi Brian First of all separate the fixed & Variablepart from the given information. Variable Selling Expenses 3* ( 720,000 / 90 ) 24,000.00 Variable Admiistrative Expenses ( 720,00 * 3%) 21,400.00 Total Variable Costs 45,600.00 Fixed Costs 80,400.00 Total Variable Cost per Unit ( 21,400 / 8000 ) 2.68 Hence , the answer is Y = 80,400+2.675X
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