Stanley's Bicycles Store Buys Bicycles on Average for $610 and Sells

question 183

Multiple Choice

Stanley's Bicycles store buys bicycles on average for $610 and sells them on average for $780. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1700 a month rent for his store, and also pays $8000 a month to his staff in addition to the commissions. Stanley sold 160 bicycles in June. If Stanley prepares a traditional income statement for the month of June, what would be his gross profit?

• A)$222,400
• B)$27,200
• C)$97,600
• D)$124,800

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Definitions:

Proportional Usage

Proportional usage refers to the allocation or consumption of resources, assets, or services in a manner that is in accordance with their relative proportion or share.

Algebraic Equation

A mathematical statement that shows the equality of two expressions, usually involving variables and constants, related by operations like addition, subtraction, multiplication, and division.

Sequential Method

The sequential method is an approach to allocating service department costs to production departments in a linear fashion, based on a predetermined order or sequence.

Step-Up Method

An allocation method used in cost accounting to allocate support department costs to other departments incrementally.