Wendell's Bicycles store buys bicycles on average for $500 and sells them on average for $800.He pays a sales commission of 10% of sales revenue to his sales staff.Wendell pays $1,500 a month rent for his store,and also pays $3,000 a month to his staff in addition to the commissions.Wendell sold 100 bicycles in June.
-If Wendell prepares a traditional income statement for the month of June,what would be his operating income?
A)$17,500
B)$80,000
C)$30,000
D)$42,500

Question

Quizplus · Accepted Answer

Wendell's revenue from selling 100 bicycles is $80,000 (100 x $800). The cost of goods sold is $50,000 (100 x $500). The sales commission is $8,000 (10% of $80,000). Fixed costs are $1,500 (rent) + $3,000 (staff) = $4,500. Operating income is calculated as Revenue - Cost of Goods Sold - Sales Commission - Fixed Costs = $80,000 - $50,000 - $8,000 - $4,500 = $17,500.

Wendell's Bicycles Store Buys Bicycles on Average for $500 and Sells