Question

J Bonita, Ltd. is a local coat retailer. The store's accountant prepared the following income statement for the month ended January 31: $ 788,000 394,000 394,000 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expense Administrative expense Net operating income $ 23,990 50,010 74,000 $ 320,000 Bonita sells its coats for $250.00 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative expenses consist of fixed costs plus a variable component equal to 6% of sales.

Answer 1

Answer

			Per unit
Sales Revenue		$788,000	$250
Variable Expenses:
Cost of Goods Sold	$394,000		$125
Selling Expense	$20,488		$7
Administrative Expense	$47,280		$15
Total Variable Expenses		$461,768	$0
Contribution Margin		$326,232	$0
Fixed Expenses:
Selling Expense	$3,502
Administrative Expense	$2,730
Total Fixed Expenses		$6,232
Operating Income		$320,000

Calculations:

Number of coats sold;
Sales revenue	$788,000
÷ Selling price	$250
= Number of coats sold	$3,152
Selling expense:
Total	$23,990
Variable [3,152 Coats x $6.50]	($20,488)
Fixed	$3,502
Administrative expense:
Total	$50,010
Variable [$788,000 x 6%]	($47,280)
Fixed	$2,730