Question

Assume the following information for a merchandising company:

Number of units sold		20,000
Selling price per unit	$	30
Variable selling expense per unit	$	3.3
Variable administrative expense per unit	$	2.8
Fixed selling expenses	$	30,000
Fixed administrative expenses	$	50,000
Beginning merchandise inventory	$	24,000
Ending merchandise inventory	$	19,000
Merchandise purchases	$	340,000

What is the net operating income?

Answer 1

Solution:
	Operating Income Statement
		Amount	Amount
	Revenues:
	Sales Revenue (20,000 Units X $ 30)		$        600,000
	Less: Cost of Goods Sold
	Beginning merchandie inventory	$            24,000
	add: Purchases	$         340,000
	Total Goods Available for Sold	$         364,000
	Less: Ending merchandise inventory	$            19,000
	Cost of Goods Sold		$        345,000
	Contribution Margin		$        255,000
	Variable Adminstrative Expenses (20,000 X $ 2.80)	$            56,000
	Fixed Administrative Expenses	$            50,000
	Variable Selling Expenses (20,000 X $ 3.30)	$            66,000
	Fixed Selling Expenses	$            30,000
	Total Operating Expenses		$        202,000
	Net Operating Income		$           53,000