Problem D225 Part Level Submission a Problem D225 Part Level

Problem D2-25 (Part Level Submission)

(a)

Problem D2-25 (Part Level Submission) J Sheridan, Ltd. is a local coat retailer. The store’s accountant prepared the following income statement for the month ended January 31: Sales revenue $ 782,500 Cost of goods sold 335,500 Gross margin 447,000 Operating expenses   Selling expense $ 24,890   Administrative expense 49,710 74,600 Net operating income $ 372,400 Sheridan sells its coats for $250 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative expenses consist of fixed costs plus a variable component equal to 5% of sales.

Solution

Sales revenue 782500 Divide: Selling price 250 Number of units sold 3130 Selling expense 24890 Less: Variable (3130*6.50) 20345 Fixed selling expense 4545 Admin expense 49710 Less: variable (782500*5%) 39125 Fixed admin cost 10585 Contribution margin Income Statement: Sales revnue 782500 Less: Variable cost Cost of goods sold 335,500 Selling expense-variable 20,345 Admin-Variable 39,125 Total variable cost 394,970 Contribution margin   387,530 Less; Fixed cost Fixed selling cost 4545 Fixed admin cost 10585 Total fixed cost 15130 Net Income 372400