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 $ 960,000 Cost of goods sold 420,000 Gross margin 540,000 Selling and administrative expenses: Selling $ 200,000 Administrative 75,000 275,000 Net operating income $ 265,000 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

Bee Company's net operating income for the second quarter using the contribution approach is:

$156,200
$685,000
$431,200
$265,000

Answer 1

$431,200

Step-by-step explanation:

Total Variable cost:

= Cost of goods sold + Selling expenses (8% of sales) + Administrative expenses

= 420,000 + (0.08 × $960,000) + [($960,000 ÷ $60) × 2]

= 420,000 + $76,800 + $32,000

= $528,800

Administrative expenses = [(sales ÷ Average selling price per unit) × Fixed administrative expenses per unit]

Therefore,

Bee Company's net operating income for the second quarter:

= Sales - Total Variable cost

= $960,000 - $528,800

= $431,200