Toby's Farm Store buys portable generators for $500 and sells them for $800.He pays a sales commission of 5% of sales revenue to his sales staff.Toby pays $2,000 a month rent for his store,and also pays $1,800 a month to his staff in addition to the commissions.Toby sold 200 generators in June.
- If Toby prepares a contribution margin income statement for the month of June,what would be his operating income?
A)$48,200
B)$108,000
C)$160,000
D)$56,000

Question

Quizplus · Accepted Answer

The operating income is calculated as follows: Sales revenue (200 generators x $800) = $160,000. Cost of goods sold (200 generators x $500) = $100,000. Gross profit = $160,000 - $100,000 = $60,000. Sales commission (5% of $160,000) = $8,000. Total fixed expenses (rent + staff salary) = $2,000 + $1,800 = $3,800. Operating income = Gross profit - Sales commission - Total fixed expenses = $60,000 - $8,000 - $3,800 = $48,200.

Toby's Farm Store Buys Portable Generators for $500 and Sells