Butler Sales Company Is a Distributor That Has an Exclusive

question 57

Essay

Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company. Butler Sales Company's traditional format income statements for the last two years are given below:
$\begin{array}{lrr} & \text { This Year } & \text { Last Year } \\\text { Units sold } & 200,000& 160,000 \\\text { Sales revenue } & \$ 1,000,000& \$ 800,000 \\\text { Cost of goods sold } & \underline{700,00 0} & \underline{560,000}\\\text { Gross margin } & 300,000 & 240,000 \\\text { Selling and administrative expense } & \underline{210,000} & 198,000 \\\text { Net operating income } & \$ 90,000 & \$ 42,00 0\end{array}$ Selling and administrative expense is a mixture of fixed costs and variable costs that vary with respect to the number of units sold.
Required:
a. Estimate the company's variable selling and administration expense per unit, and its total fixed selling and administrative expense per year.
b. Compute the company's contribution margin for this year.

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Definitions:

Lt. Charles Wilkes

A U.S. Navy officer who led the United States Exploring Expedition, achieving significant maritime and geographical discovery in the early 19th century.

Smithsonian Institute

An educational and research institution and associated museum complex, primarily located in Washington, D.C., established for the increase and diffusion of knowledge.

Civilization

An advanced stage of human social development and organization that includes the development of cities, writing, arts, sciences, and complex governance.

Inclusive View

A perspective or approach that aims to consider and incorporate diverse sets of experiences, views, and backgrounds.