Question

Bolka Corporation, a merchandising company, reported the following results for October:

Sales	$	500,000
Cost of goods sold (all variable)	$	170,700
Total variable selling expense	$	24,600
Total fixed selling expense	$	21,500
Total variable administrative expense	$	10,000
Total fixed administrative expense	$	34,900

The gross margin for October is:

Multiple Choice

• $294,700

• $329,300

• $238,300

• $443,600

Answer 1

Gross margin = Sales - Cost of goods sold

= 500000 - 170700

= 329300

Correct choice B

Administrative expense and selling expense are used to arrive at net income and are deducted from the gross margin.

Hence selling and adminstrative costs are not required for calculating gross margin