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 traditional income statement for the month of June, what would be his operating income?
A) $72,000
B) $48,200
C) $60,000
D) $160,000

Question

Quizplus · Accepted Answer

Revenue from selling generators = 200 x $800 = $160,000
Cost of goods sold = 200 x $500 = $100,000
Gross profit = $160,000 - $100,000 = $60,000
Sales commission = 5% x $160,000 = $8,000
Total operating expenses = $2,000 + $1,800 + $8,000 = $11,800
Operating income = Gross profit - Total operating expenses = $60,000 - $11,800 = $48,200

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