question 4 of 7policiescurrent attempt in progressrestate the following income statement for a retailer in…
question 4 of 7policiescurrent attempt in progressrestate the following income statement for a retailer in contribution format.sales revenue ($50 per unit) $ 65,000less cost of goods sold ($16 per unit) 20,800gross margin 44,200less operating costs:commissions expense ($3 per unit) $ 3,900salaries expense 8,000advertising expense 2,500shipping expense ($2 per unit) 2,600 18,000operating income $ 27,200
Answer
Explanation:
Step1: Calculate total units sold
$\text{Total units} = \frac{\text{Total Sales Revenue}}{\text{Per Unit Sales Price}} = \frac{65000}{50} = 1300$ units
Step2: Classify variable/fixed costs
Variable costs (vary with units): Cost of Goods Sold ($16/unit), Commissions ($3/unit), Shipping ($2/unit) Fixed costs (fixed total): Salaries, Advertising
Step3: Compute total variable costs
Total variable COGS: $16 \times 1300 = 20800$ Total variable commissions: $3 \times 1300 = 3900$ Total variable shipping: $2 \times 1300 = 2600$ Total variable costs: $20800 + 3900 + 2600 = 27300$
Step4: Compute contribution margin
Total Contribution Margin: $65000 - 27300 = 37700$ Per Unit Contribution Margin: $50 - (16+3+2) = 29$
Step5: Compute operating income
Total fixed costs: $8000 + 2500 = 10500$ Operating Income: $37700 - 10500 = 27200$
Answer:
| Category | Total Amount | Per Unit Amount |
|---|---|---|
| Sales Revenue | $$65,000$ | $$50$ |
| Less: Variable Costs | ||
| Cost of Goods Sold | $$20,800$ | $$16$ |
| Commissions Expense | $$3,900$ | $$3$ |
| Shipping Expense | $$2,600$ | $$2$ |
| Total Variable Costs | $$27,300$ | $$21$ |
| Contribution Margin | $$37,700$ | $$29$ |
| Less: Fixed Costs | ||
| Salaries Expense | $$8,000$ | - |
| Advertising Expense | $$2,500$ | - |
| Total Fixed Costs | $$10,500$ | - |
| Operating Income | $$27,200$ | - |