Bee Company is a honey wholesaler. An income statement and other data for the se

Question

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below Bee Company Income Statement For the Quarter Ended June 30 Sales : … Cost of goods sold.. Gross margin. Selling and administrative expenses: $960,000 420,000 540,000 Selling." $200,000 75,000 275,000 Administrative$265,000 Net operating income .. Other data Average selling price.$60 per unit Selling expenses Fixed selling expenses plus 8% of sales Administrative expense Fixed administrative expenses plus $2 per unit If 24,000 units are sold during the third quarter and this activity is within the relevant range, Bee Company's expected contribution margin w O $810,000 O $646.800 O$762.000 O$760,080

Explanation / Answer

Answer:

Contribution Margin = Sales - Variable Expenses
Expected Units Sold = 24,000 units
Sales = 24,000 * $60 = $1,440,000

Variable Expenses = Cost of Goods sold + Variable Selling Expenses + Variable Administrative Expenses
Current Units sold = 960,000 / 60 =16,000 units
Current Cost of Goods sold (per unit) = 420,000 / 16,000 = $26.25

Budgeted Cost of Goods = 24,000 * $26.25 = $630,000
Budgeted Variable Selling Expenses = 8% of $1,440,000 = $115,200
Budgeted Variable Administrative Expense = $2 * 24,000 = $48,000

Budgeted Variable Expenses = $630,000 + $115,200 + $48,000
Budgeted Variable Expenses = $793,200

Contribution Margin = $1,440,000 - $793,200
Contribution Margin = $646,800

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