Small group problems – Chapter 1
1. An income statement for Sam's Bookstore for the first quarter of the year is presented below:
Sales
$900,000
Cost of goods sold
630,000
Gross Margin
270,000
Selling expenses
100,000
Administration expenses 104,000
Net operating income
66,000
On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining
selling expenses being fixed. The variable administrative expenses are 4% of sales with the
remainder being fixed.
The contribution margin for Sam's Bookstore for the first quarter is:
A) $180,000
B) $774,000
C) $144,000
D) $756,000
2.
2. At a sales volume of 30,000 units, Carne Company's total fixed costs are $30,000 and total variable costs are
$45,000. The relevant range is 20,000 to 40,000 units.
If Carne Company were to sell 32,000 units, the total expected cost would be:
A.
$75,000
B.
$78,000
C.
$80,000
D.
$77,000
1. Unit sales = $900,000 ÷ $50 per book = 18,000 books
Sales
$900,000
Variable expenses:
Cost of goods sold
$630,000
Variable selling ($5 per book x 18,000 books)
90,000
Variable administrative (4% of $900,000)
36,000
Contribution margin
756,000
$144,000
The contribution margin for Sam's Bookstore for the first quarter is:
A) $180,000
B) $774,000
C) $144,000
D) $756,000
2.
At a sales volume of 30,000 units, Carne Company's total fixed
costs are $30,000 and total variable costs are $45,000. The relevant
range is 20,000 to 40,000 units.
If Carne Company were to sell 32,000 units, the total expected cost would be:
A. $75,000
B. $78,000
C. $80,000
D. $77,000
Variable cost per unit = Total variable cost ÷ Units = $45,000 ÷ 30,000 = $1.50 per unit
Total cost = Fixed cost + (Variable cost per unit × Units)
= $30,000 + ($1.50 per unit × 32,000 units) = $78,000