Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below:
$\begin{array}{|l|r|r|}
\hline & \text { July } & \text { August } \
\hline \text { Sales in Units } & 11,000 & 10,000 \
\hline \text { Sales Revenue } & \$ 165,000 & \$ 150,000 \
\hline \text { Less: Cost of Goods Sold } & \underline{72,600} & \underline{66,000} \
\hline \text { Gross Margin } & 92,400 & 84,000 \
\hline \text { Less: Operating Expenses: } & & \\hline \text { Rent } & 12,000 & 12,000 \
\hline \text { Sales Commissions } & 13,200 & 12,000 \
\hline \text { Maintenance Expenses } & 13,500 & 13,000 \
\hline \text { Clerical Expenses } & \underline{16,000} & \underline{15,000} \
\hline \text { Total Operating Expenses } & \underline{\$ 54,700} & \underline{\$ 52,000} \
\hline \text { Operating Income } & \underline{\$ 37,700} & \underline{\$ 32,000} \
\hline
\end{array}$
All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed). Assume that the relevant range includes all of the activity levels mentioned in this problem.

-If sales are projected to be 8,000 units in September,what would be total operating expenses?
A) $41,600.
B) $44,750.
C) $46,600.
D) $49,300.

Question

Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below:
$\begin{array}{|l|r|r|}
\hline & \text { July } & \text { August } \
\hline \text { Sales in Units } & 11,000 & 10,000 \
\hline \text { Sales Revenue } & \$ 165,000 & \$ 150,000 \
\hline \text { Less: Cost of Goods Sold } & \underline{72,600} & \underline{66,000} \
\hline \text { Gross Margin } & 92,400 & 84,000 \
\hline \text { Less: Operating Expenses: } & & \\hline \text { Rent } & 12,000 & 12,000 \
\hline \text { Sales Commissions } & 13,200 & 12,000 \
\hline \text { Maintenance Expenses } & 13,500 & 13,000 \
\hline \text { Clerical Expenses } & \underline{16,000} & \underline{15,000} \
\hline \text { Total Operating Expenses } & \underline{\$ 54,700} & \underline{\$ 52,000} \
\hline \text { Operating Income } & \underline{\$ 37,700} & \underline{\$ 32,000} \
\hline
\end{array}$
All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed). Assume that the relevant range includes all of the activity levels mentioned in this problem.

-If sales are projected to be 8,000 units in September,what would be total operating expenses?
A) $41,600.
B) $44,750.
C) $46,600.
D) $49,300.

Quizplus · Accepted Answer

To estimate the total operating expenses for September with projected sales of 8,000 units, we need to analyze the behavior of each component of the operating expenses based on the information from July and August. - **Rent**: This is a fixed cost, as it remains constant at $12,000 regardless of the number of units sold.- **Sales Commissions**: This appears to be variable or mixed, as it changes with the number of units sold. From July to August, as sales decreased from 11,000 units to 10,000 units, sales commissions decreased from $13,200 to $12,000. The decrease in sales commissions is proportional to the decrease in sales revenue, suggesting a variable component.- **Maintenance Expenses**: This cost changes, but not in direct proportion to sales, suggesting it's a mixed cost.- **Clerical Expenses**: This also changes, indicating it might be mixed, but the change is not directly proportional to the change in sales units.To estimate the total operating expenses for September, we need to adjust each component based on its behavior (fixed, variable, or mixed). However, without specific information on how each cost behaves beyond the provided data, a direct calculation cannot be accurately performed. Therefore, the answer must be inferred based on the pattern of total operating expenses as sales units decrease.Given the pattern from July to August as sales decreased, total operating expenses also decreased. Assuming a similar rate of decrease, and considering the sales units are decreasing further to 8,000 units in September, we can infer that the total operating expenses would decrease further but not in a strictly proportional manner due to the presence of fixed costs.Among the provided options, without a clear method to calculate each component's behavior, we select the option that seems reasonable based on the pattern observed:C) $46,600 is chosen as an educated guess based on the pattern of decreasing total operating expenses as sales units decrease, acknowledging the mix of fixed, variable, and mixed costs without specific formulas to calculate each precisely.

Comparative Income Statements for Boggs Sporting Equipment Company for the Last