The University Store, Inc. is the major bookseller for four nearby colleges. An income statement for the first quarter of the year is presented below:
On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of the administrative expenses are fixed.
-If 25,000 books are sold during the second quarter and this activity is within the relevant range,the company's expected contribution margin would be:
A) $875,000
B) $300,000
C) $175,000
D) $65,000

Question

The University Store, Inc. is the major bookseller for four nearby colleges. An income statement for the first quarter of the year is presented below:
  On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of the administrative expenses are fixed.
-If 25,000 books are sold during the second quarter and this activity is within the relevant range,the company's expected contribution margin would be:
A) $875,000 
B) $300,000 
C) $175,000 
D) $65,000

Quizplus · Accepted Answer

Unit sales = $800,000 ÷ $40 per book = 20,000 books
Cost per book = $560,000 ÷ 20,000 books = $28 per book
 11ea7761_19a9_c1d0_81a5_d7004123df0a_TB2580_00