Schrute Farm Sales buys portable generators for $450 and sells them for $720. He pays a sales commission of 5% of sales revenue to his sales staff. Mr. Schrute pays $2,000 a month rent for his store, and also pays $1,700 a month to his staff in addition to the commissions. Mr. Schrute sold 200 generators in June. If Mr. Schrute prepares a traditional income statement for the month of June, what
Would be his operating income?

Question

Quizplus · Accepted Answer

The operating income is calculated as follows:  Sales Revenue = 200 generators * $720 = $144,000  Cost of Goods Sold = 200 generators * $450 = $90,000  Gross Profit = Sales Revenue - Cost of Goods Sold = $144,000 - $90,000 = $54,000  Sales Commission = 5% of $144,000 = $7,200  Total Expenses = Rent + Staff Salary + Sales Commission = $2,000 + $1,700 + $7,200 = $10,900  Operating Income = Gross Profit - Total Expenses = $54,000 - $10,900 = $43,100

Schrute Farm Sales Buys Portable Generators for $450 and Sells