TB MC Qu. 1-254 An income statement for Sam's Bookstore for ... An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement For Quarter Ended March 31 Sales $ 900,000 Cost of goods sold 635,000 Gross margin 265,000 Selling and administrative expenses Selling $ 101,000 Administration 106,000 207,000 Net operating income $ 58,000 On average, a book sells for $60. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed. The net operating income using the contribution approach for the first quarter is:

Net operating income $ 58,000

Explanation:

Sam's Bookstore

Income Statement

For Quarter Ended March 31

Sales $ 900,000

Variable Selling Expenses $ 75,000 (15000*5)

Variable Administrative Expenses $ 27000 (3% 0f $ 900,000)

Contribution Margin 798,000

Less Fixed Expenses

Less COGS 635,000 (all taken fixed)

Selling and administrative expenses 105,000 (207,000 - 102,000)

Net operating income $ 58,000

Sam's Bookstore

Income Statement

For Quarter Ended March 31

Sales $ 900,000

Cost of goods sold 635,000

Gross margin 265,000

Selling and administrative expenses 207,000

Selling $ 101,000

Administration 106,000

Net operating income $ 58,000

Working: No of units = Total Sales / Unit Cost = $ 900,000 / $ 60 = 15,000