Problem D2-25 Bryant, Ltd. is a local coat retailer. The store\'s accountant pre

Question

Problem D2-25 Bryant, Ltd. is a local coat retailer. The store's accountant prepared the following income statement for the month ended January 31: Sales revenue Cost of goods sold Gross margin Operating expenses $750,000 300,000 450,000 $23,560 Selling expense Administrative expense 49,500 73,060 Net operating income s 376,940 Bryant sells its coats for $300 each. Selling expenses consist of fixed costs plus a commission of $6 per coat. Administrative expenses consist of fixed costs plus a variable component equal to 5% of sales.

Explanation / Answer

Answer 1. Contribution Format Income Statement Total   Per Unit Sales Revenue              750,000                 300 Less: Variable Costs Cost of Goods Sold          300,000                 120 Selling Expense - 2,500 Units X $6            15,000                      6 Administrative Expenses - $750,000 X 5%            37,500                   15 Total Variable Costs              352,500                 141 Contribution Margin              397,500                 159 Less: Fixed Costs Selling Expense -$23,560 - $15,000              8,560 Administrative Expenses - $49,500 - $37,500            12,000 Total Fixed Costs                20,560 Net Operating Income              376,940 Answer 2. Operating Expenses = 141x + $20,560 Answer 3. Contribution Margin = 2,700 Coats X $159 (Contribution Margin per Unit) Contribution Margin = $429,300

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