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:$\begin{array} { | l | r | }
\hline \text { Selling price per unit } & \$ 40 \
\hline \text { Sales commission } & 5 \% \
\hline \text { Purchase price (cost) per unit } & \$ 18 \
\hline \text { Advertising expense } & \$ 4,000 \text { per month } \
\hline \text { Administrative expense } & \$ 4,500 \text { per month plus } 15 \% \text { of sales } \
\hline
\end{array}$Assume that all activity mentioned in this problem is within the relevant range.

-What is the expected gross margin next month?
A) $11,200.
B) $14,400.
C) $16,400.
D) $17,600.

Question

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:$\begin{array} { | l | r | } 
\hline \text { Selling price per unit } & \$ 40 \
\hline \text { Sales commission } & 5 \% \
\hline \text { Purchase price (cost) per unit } & \$ 18 \
\hline \text { Advertising expense } & \$ 4,000 \text { per month } \
\hline \text { Administrative expense } & \$ 4,500 \text { per month plus } 15 \% \text { of sales } \
\hline
\end{array}$Assume that all activity mentioned in this problem is within the relevant range.

-What is the expected gross margin next month?
A) $11,200.
B) $14,400.
C) $16,400.
D) $17,600.

Quizplus · Accepted Answer

The expected gross margin is calculated as follows: Gross Margin = (Selling Price per Unit - Purchase Price per Unit) x Number of Units Sold = ($40 - $18) x 800 = $17,600.

Gasson Company Is a Merchandising Firm Assume That All Activity Mentioned in This Problem Is Within