An income statement for Sam's Bookstore for the first quarter of the year is presented below:
On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed.
-The net operating income using the contribution approach for the first quarter is:
A) $270,000
B) $180,000
C) $144,000
D) $66,000

Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below:
  On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed.
-The net operating income using the contribution approach for the first quarter is:
A) $270,000 
B) $180,000 
C) $144,000 
D) $66,000

Quizplus · Accepted Answer

Unit sales = $900,000 ÷ $50 per book = 18,000 books
Selling expenses = Fixed selling expenses + ($5 per book x 18,000 books)
$100,000 = Fixed selling expenses + $90,000
Fixed selling expenses = $100,000 − $90,000 = $10,000
Administrative expenses = Fixed administrative expenses + (4% of $900,000)
$104,000 = Fixed administrative expenses + $36,000
Fixed administrative expenses = $104,000 − $36,000 = $68,000
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An Income Statement for Sam's Bookstore for the First Quarter