An Income Statement for Sam's Bookstore for the First Quarter

question 78

Multiple Choice

An income statement for Sam's Bookstore for the first quarter of the year is presented below: On average, a book sells for $65. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed. The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:

• A) Y = $116,300 + $4.00X
• B) Y = $116,300 + $5.95X
• C) Y = $177,700 + $5.95X
• D) Y = $177,700 + $7.90X

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Definitions:

Natural Business Year

A fiscal year that ends when a business's sales activities are at their lowest point, facilitating easier inventory and activity analysis.

12-month Period

A 12-month period typically refers to a full year, used in financial reporting and analysis to compare performance or changes over the span of a year.

Income Summary Account

A temporary account used in the closing process to summarize the period's revenues and expenses before transferring the net income or loss to retained earnings.

Permanent Accounts

Permanent accounts refer to the balance sheet accounts whose balances are carried over into the next accounting period, including assets, liabilities, and equity accounts.