Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below:

Sam's Bookstore
Income Statement
For Quarter Ended March 31
Sales			$	910,000
Cost of goods sold				560,000
Gross margin				350,000
Selling and administrative expenses
Selling	$	119,000
Administration		142,000		261,000
Net operating income			$	89,000

On average, a book sells for $65. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed.

The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:

Answer 1

Number of units sold= 910000/65 = 14000
Selling expenses:
Total expenses			119000
Less: VC (910000/65*4)			56000
Fixed selling expenses			63000
Admin expenses
Total expenses			142000
Less: Vc (910000*3%)			27300
Fixed admin expenses			114700
Total Fixed cost = 63000+114700 = 177700
Total VC = 56000+27300 = 83300
VC per unit = 83300/14000 = 5.95
Cost formul for selling and admin cost = 5.95 x + 177700