Comparative Income Statements for Boggs Sporting Equipment Company for the Last

question 21

Multiple Choice

Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below:
$\begin{array}{|l|r|r|}\hline & \text { July } & \text { August } \\\hline \text { Sales in Units } & 11,000 & 10,000 \\\hline \text { Sales Revenue } & \$ 165,000 & \$ 150,000 \\\hline \text { Less: Cost of Goods Sold } & \underline{72,600} & \underline{66,000} \\\hline \text { Gross Margin } & 92,400 & 84,000 \\\hline \text { Less: Operating Expenses: } & & \\\hline \text { Rent } & 12,000 & 12,000 \\\hline \text { Sales Commissions } & 13,200 & 12,000 \\\hline \text { Maintenance Expenses } & 13,500 & 13,000 \\\hline \text { Clerical Expenses } & \underline{16,000} & \underline{15,000} \\\hline \text { Total Operating Expenses } & \underline{\$ 54,700} & \underline{\$ 52,000} \\\hline \text { Operating Income } & \underline{\$ 37,700} & \underline{\$ 32,000} \\\hline\end{array}$
All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed) . Assume that the relevant range includes all of the activity levels mentioned in this problem.


-Which of the operating expenses of the company is variable?

• A) Rent.
• B) Sales commissions.
• C) Maintenance expenses.
• D) Clerical expenses.

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Definitions:

Non-Normal Cash Flows

This refers to cash flow patterns that do not follow a regular or predictable pattern, often seen in complex investment projects.

Initial Cash Flow

The initial amount of money invested or spent on a project or investment, often used as a reference point in cash flow analysis.

Cash Flows

The collective total of cash being injected into and withdrawn from a business, with a focus on liquidity impact.

IRR

The rate of return at which the sum of the present value of all cash inflows and outflows from an investment or project is zero.