1 Chapter 2: Applying Excel 3 Data 4 Sales 5 Variable costs 6 Cost of goods sold

Question

1 Chapter 2: Applying Excel 3 Data 4 Sales 5 Variable costs 6 Cost of goods sold 7 Variable selling 8 Variable administrative 9 Fixed costs 10 Fixed selling 11 Fixed administrative 12 $67,000 $38,000 $3.800 $3,600 $2,500 $1,500 2. Suppose that sales are 25% higher than the data provided in requirement 1 (d) when sales increase by 25%, which of the following should also increase by 25% in a merchandizing company? (Your the question mark to empty the box for a wrong answer.) 8 1 Chapter 2: Applying Excel Variable cost 3 Data 4 Sales 5 Variable costs: 6 Cost of goods sold 7 Variable selling 8 Variable administrative 9 Fixed costs 10 Fixed selling 11 Fixed administrative 12 83,750 Fixed cost Gross margin Contribution margin $47,500 $4,750 54,500 Net operating income 2,500 $1,500 (e) when sales increase by 25%, which of the following should increase by more than 25% in a merchandizing company with the question mark to empty the box for a wrong answer.) Variable cost Fixed cost Gross margin Contribution margin Net operating income

Explanation / Answer

Soution:-

Due to 25% increase in Sales the following items will increase by 25 % as corresponding to sales

i)Variable cost

ii)Contribution margin.

iii) Gross margin.

The other 2 tiem will not increase by exact 25%.

Note:- Since question (d) and (e) are exactly same. Hence the above answer is for both queston.

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