An income statement for Sam's Bookstore for the first quarter of the year is presented below: 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:
A) Y = $116,300 + $4.00X
B) Y = $116,300 + $5.95X
C) Y = $177,700 + $5.95X
D) Y = $177,700 + $7.90X

Question

An income statement for Sam's Bookstore for the first quarter of the year is presented below:  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:
A) Y = $116,300 + $4.00X 
B) Y = $116,300 + $5.95X 
C) Y = $177,700 + $5.95X 
D) Y = $177,700 + $7.90X

Quizplus · Accepted Answer

To find the cost formula for selling and administrative expenses, we need to find the fixed and variable components separately.

Variable selling expenses = $4 per book
Variable administrative expenses = 3% of sales = 0.03 * total sales

Fixed selling expenses = total selling expenses - (variable selling expenses * number of books sold) = $23,000 - ($4 * X)
Fixed administrative expenses = total administrative expenses - (variable administrative expenses * total sales) = $146,000 - (0.03 * total sales)

Total selling and administrative expenses = Fixed selling expenses + Variable selling expenses + Fixed administrative expenses + Variable administrative expenses

Substituting the values and simplifying, we get:

Total selling and administrative expenses = $177,700 + $5.95X

Therefore, the correct choice is C.

An Income Statement for Sam's Bookstore for the First Quarter