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 $3,000 a month to his staff in addition to the commissions.Wendell sold 100 bicycles in June.
-If Wendell prepares a contribution margin income statement for the month of June,what would be his operating income?
A)$ 58,000
B)$ 26,500
C)$ 17,500
D)$ 80,000

Question

Quizplus · Accepted Answer

The operating income is calculated as follows: Sales Revenue = 100 bicycles * $800 = $80,000. Cost of Goods Sold = 100 bicycles * $500 = $50,000. Gross Profit = $80,000 - $50,000 = $30,000. Sales Commission = 10% of $80,000 = $8,000. Total Fixed Costs = $1,500 (rent) + $3,000 (staff salary) = $4,500. Operating Income = Gross Profit - Sales Commission - Total Fixed Costs = $30,000 - $8,000 - $4,500 = $17,500.

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