1 answer

An income statement for Sam's Bookstore for the first quarter of the year is presented below:...

Question:

An income statement for Sams Bookstore for the first quarter of the year is presented below: Sams Bookstore Income Statemen

An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement Por Quarter Ended March 31 Sales $950,000 Cost of goods sold 660,000 Gross margin 290,000 Selling and administrative expenses Selling $ 106,000 Administration 116,000 222,000 Net operating income $ 68,000 On average, a book sells for $50. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 5% of sales with the remainder being fixed. The cost formula for selling and administrative expenses with "X' equal to the number of books sold is: Multiple Choice O Y =$115,500 $4.00X 0 O Y = $115,500 + $6.50X 0 Y = $98.500 - $6.50X 0 O Y = $98,500 $9.00x

Answers

Units of books sold = $950,000/$50 = 19,000 books

Variable costs:

Variable administrative expenses = $50*5% = $2.5

Variable selling expense = $4

Total variable selling and administrative expense = $4+2.5 = $6.5

Fixed costs:

Selling expense = $106,000 - 76,000 (19,000*$4) = $30,000

Administrative expense = $116,000 - 47,500 (19,000*$2.5) = $68,500

Total fixed expense = $30,000+68,500 = $98,500

Hence cost formula for selling and administrative expense is:

Y = $98,500 + 6.50X

.

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