Question

Cherokee Inc. is a merchandiser that provided the following information:

		Amount
Number of units sold		12,000
Selling price per unit	$	17
Variable selling expense per unit	$	1
Variable administrative expense per unit	$	3
Total fixed selling expense	$	21,000
Total fixed administrative expense	$	16,000
Cost of Goods sold (variable expense)	$	75,000

A. What is the Sales Revenue

B. What is the Total Variable Expense

C. What is the Contribution Margin

D. What is the total Fixed Expense

E. What is the Net Operating Income

Answer 1

A. Sales Revenue

Sales Revenue = No of Units Sold * Selling price per unit

=12000*$17

=$204,000

B. Total VAriable Expenses

Total Variable Expenses = Variable Selling Expenses + Variable Administrative Expense

=(12000*1) +(120000*3)

=$12000+$36000

=$48000

C. Contribution Margin

Contribution Margin = Sales - Variable costs

=$204000 - $48000-$75000

=$81000

D.Total Fixed Expenses

Total Fixed Expense = Total Fixed Selling Expense + Total Fixed Administative Expense

=$21,000 +$16000

=$37000

E. Net Operating Income

NEt Operating Income = Sales - COGS - Variable Costs - Fixed Costs

=$204000 -$75000 -$48000-$37000

Net Operating Income = $44000