Schrute Farm Sales Buys Portable Generators for $450 and Sells

question 86

Multiple Choice

Schrute Farm Sales buys portable generators for $450 and sells them for $740. He pays a sales commission of 5% of sales revenue to his sales staff. Mr. Schrute pays $6000 a month rent for his store, and also pays $1800 a month to his staff in addition to the commissions. Mr. Schrute sold 700 generators in June. If Mr. Schrute prepares a traditional income statement for the month of June, what would be his operating income?

• A)$169,300
• B)$203,000
• C)$236,700
• D)$518,000

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Definitions:

Cost-Volume-Profit Relationships

An analysis tool that helps understand how changes in cost and volume affect a company's profits.

Net Operating Income

Profit derived from a company's operations after all operating expenses have been deducted from total revenue.

Unit Sold

The total quantity of units of a product that have been sold in a given period.

Contribution Margin Ratio

The contribution margin ratio measures the proportion of revenue remaining after variable costs are deducted, indicating the percentage of sales that contributes to fixed costs and profit.