Reference: 06-03
Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure: $$\begin{array} { | l | l | }
\hline \text { Selling price per unit } & \$ 40 \
\hline \text { Sales commission } & 5 \% \
\hline \text { Purchase price (cost) per unit } & \$ 18 \
\hline \text { Advertising expense } & \$ 4,000 \text { per month } \
\hline \text { Administrative expense } & \$ 4,500 \text { per month plus } 15 \% \text { of sales } \
\hline
\end{array}$$ Assume that all activity mentioned in this problem is within the relevant range.
-The expected net income next month is?
A)$5,100.
B)$11,200.
C)$2,700.
D)$7,500.

Question

Reference: 06-03
Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure: $$\begin{array} { | l | l | } 
\hline \text { Selling price per unit } & \$ 40 \
\hline \text { Sales commission } & 5 \% \
\hline \text { Purchase price (cost) per unit } & \$ 18 \
\hline \text { Advertising expense } & \$ 4,000 \text { per month } \
\hline \text { Administrative expense } & \$ 4,500 \text { per month plus } 15 \% \text { of sales } \
\hline
\end{array}$$ Assume that all activity mentioned in this problem is within the relevant range.
-The expected net income next month is?
A)$5,100.
B)$11,200.
C)$2,700.
D)$7,500.

Quizplus · Accepted Answer

To calculate the net income:  1. Total Sales = 800 units * $40 = $32,000  2. Cost of Goods Sold = 800 units * $18 = $14,400  3. Sales Commission = 5% of $32,000 = $1,600  4. Advertising Expense = $4,000  5. Administrative Expense = $4,500 + 15% of $32,000 = $4,500 + $4,800 = $9,300  6. Total Expenses = $14,400 + $1,600 + $4,000 + $9,300 = $29,300  7. Net Income = Total Sales - Total Expenses = $32,000 - $29,300 = $2,700

Reference: 06-03 Gasson Company Is a Merchandising Firm Assume That All Activity Mentioned in This Problem Is Within

Reference: 06-03
Gasson Company Is a Merchandising Firm Assume That All Activity Mentioned in This Problem Is Within