1 Scottsdale Fine Piano%u2019s purchases pianos from a well-known manufacturer a

Question

1Scottsdale Fine Piano%u2019s purchases pianos from a well-known manufacturer and sells them through their retail store. The Baby Grand Pianos sell, on average, for $2,500 each. The average cost of a piano from the manufacturer is $1,500. The costs that the Company incurs in a typical month are presented below.

Selling Costs:

Advertising $ 950 Per Month

Delivery of Pianos $ 60 Per Piano Sold

Sales Salaries and Commissions $ 4,800 Per Month, plus 4% of Sales

Utilities $ 650 Per Month

Depreciation on Sales Facilities $ 5,000 Per Month

Administrative Costs:

Executive Salaries $13,500 Per Month

Depreciation of Office Equipment $ 900 Per Month

Clerical $ 2,500 Per Month, plus $40 Piano Sold

Insurance $ 700 Per Month

During August, the Company sold and delivered 60 pianos

Explanation / Answer

FIXED EXPENSES PER MONTH = 950+4800+650+5000+13500+900+2500+700

=29000

VARIABLE COST PER PIANO = 1500+60+(4%OF 2500)+40

=1700

PROFIT FOR THE MONTH OF AUGUST = 60*[2500-1700]

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