Bowring Company took the following data from their income statement at the end of the current year.
$$\begin{array} { l r }
\text { Per-unit product cost: } & \$ 30 \
\text { Gross margin percentage: } & 40 \% \
\text { Selling and admini strative expenses } & \$ 30,000 \
\text { Operating income } & \$ 10,000
\end{array}$$
-Refer to the Figure.How many units were sold during the year?
A)1,000
B)1,500
C)2,000
D)3,333

Question

Bowring Company took the following data from their income statement at the end of the current year.
 $$\begin{array} { l r } 
\text { Per-unit product cost: } & \$ 30 \
\text { Gross margin percentage: } & 40 \% \
\text { Selling and admini strative expenses } & \$ 30,000 \
\text { Operating income } & \$ 10,000
\end{array}$$
-Refer to the Figure.How many units were sold during the year?
A)1,000
B)1,500
C)2,000
D)3,333

Quizplus · Accepted Answer

The gross margin percentage is 40%, meaning the cost of goods sold is 60% of sales. Let x be the number of units sold. The sales revenue is $30x$, and the cost of goods sold is $18x$ (60% of sales). The gross margin is $12x$ (40% of sales). Operating income is gross margin minus selling and administrative expenses: $12x - 30,000 = 10,000$. Solving for x gives $12x = 40,000$, so $x = 2,000$.

Bowring Company Took the Following Data from Their Income Statement