Question

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below: Bee Company Income Statement For the Quarter Ended June 30

Sales $960,000

Cost of goods sold 420,000

Gross margin 540,000

Selling and administrative expenses:

Selling $200,000

Administrative 75,000

Total Selling/Admin Expenses: 275,000

Net operating income $265,000

Other data: Average selling price $60 per unit

Selling expenses Fixed selling expenses plus 8% of sales

Administrative expense Fixed administrative expenses plus $2 per unit.

If 24,000 units are sold during the third quarter and this activity is within the relevant range, Bee Company's expected contribution margin would be:

Group of answer choices

$646,800

$762,000

$810,000

$760,080

Answer 1

	Contribution Margin format Income Statement
	Sales		(24000 x $ 60)			$ 1,440,000.00
Less:	Variable Costs
	Cost of Goods sold		(24000 x $ 26.25)		$    630,000.00
	Selling Expense		($ 1440000 x 8%)		$    115,200.00
	Administrative expense		($ 2 x 24000)		$      48,000.00
	Total variable costs					$    793,200.00
	Contribution Margin					$    646,800.00

Workings:

	Sales		$ 960,000.00
Less:	COGS		$ 420,000.00
	Gross Margin		$ 540,000.00
Less:	S&A expenses
	Selling		$ 200,000.00
	Administrative		$   75,000.00
	Total S&A		$ 275,000.00
	Net Income		$ 265,000.00

Units Sold =		Sales / Avg selling price per unit
	=	$ 960000 / $ 60
	=	16000
COGS per unit =		Cost of Goods sold / Units sold
	=	$ 420000 / 16000
	=	$   26.25