Question

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $780. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1600 a month rent for his store, and also pays $5000 a month to his staff in addition to the commissions. Stanley sold 140 bicycles in June. If Stanley prepares a contribution margin income statement for the month of June, what would be his operating income?

		$2220
		$100,380
		$109,200
		$10,560

The Heartlake Corporation manufactures and sells toy gyroscopes. The following data is related to sales and production of the toy gyroscopes for last year.  

Selling price per unit	$8.40
Variable manufacturing costs per unit	$1.88
Variable selling and administrative expenses per unit	$4.55
Fixed manufacturing overhead (in total)	$80,000
Fixed selling and administrative expenses (in total)	$81,000
Units produced during the year	520,000
Units sold during year	160,000

  
Using absorption costing, what is operating income for last year? (Round any intermediary calculations to the nearest cent.)

		$1,344,000
		$1,828,200
		$210,200
		$859,800

Answer 1

1
Sales revenue	109200	=140*780
Less: Variable costs
Cost of goods sold	84000	=140*600
Sales commission	16380	=109200*15%
Total Variable costs	100380
Contribution margin	8820
Less: Fixed costs	6600	=1600+5000
Operating income	2220
Option A $2220 is correct
2
Fixed manufacturing overhead per unit	0.15	=80000/520000
Sales revenue	1344000	=160000*8.40
Less: Cost of goods sold	324800	=160000*(1.88+0.15)
Gross margin	1019200
Less: Selling and administrative expenses	809000	=81000+(160000*4.55)
Operating income for last year	210200
Option C $210,200 is correct