Question

Cooke Company incurs $4 per unit of variable selling and administrative expense and $50,000 per month in fixed selling and administrative expense.  Of the fixed expense, $12,000 relates to depreciation each month.  Selling and administrative expense is paid in the month incurred.  During February 2011, Cooke produced 50,000 units and sold 48,000 units.  What amount would Cooke include for selling and administrative expense on its February income statement?

a.   $250,000

b.   $238,000

c.    $242,000

d.   $230,000

Answer 1

c) $242,000

Explanation:

we get here variable selling and administrative expense will be here as

Variable selling and administrative expense = variable selling and administrative expense × sold ...................1

putting here the values we get

Variable selling and administrative expense = $48,000 × $4

Variable selling and administrative expense = $192,000

and Fixed selling and administrative expense is = $50,000  

Selling and administrative expense income statement is

Selling and administrative expense = $192,000 + $50,000

Selling and administrative expense = $242,000

so correct option is c. $242,000