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 total administrative expense next month?
A) $4,800.
B) $9,300.
C) $13,300.
D) $14,900.

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 total administrative expense next month?
A) $4,800.
B) $9,300.
C) $13,300.
D) $14,900.

Quizplus · Accepted Answer

The expected total administrative expense next month is calculated as follows: Fixed administrative expense = $4,500. Variable administrative expense = 15% of sales. Sales = 800 units * $40/unit = $32,000. Variable administrative expense = 15% * $32,000 = $4,800. Total administrative expense = Fixed + Variable = $4,500 + $4,800 = $9,300.

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