Toby's Farm Store Buys Portable Generators for $500 and Sells

question 205

Multiple Choice

Toby's Farm Store buys portable generators for $500 and sells them for $800. He pays a sales commission of 5% of sales revenue to his sales staff. Toby pays $2,000 a month rent for his store, and also pays $1,800 a month to his staff in addition to the commissions. Toby sold 200 generators in June.
-If Toby prepares a contribution margin income statement for the month of June, what would be his contribution margin?

• A) $268,000
• B) $160,000
• C) $52,000
• D) $108,000

Understand the concept of unit price from a total cost.

Solve proportional reasoning problems related to multiple quantities.

Employ rounding techniques for practical arithmetic operations.

Calculate the total cost of multiple items at given unit prices.

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Definitions:

Firm's Assets

Resources owned by a company that have economic value and can be used to meet its financial obligations or invest in its operations.

Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the company's assets and earnings.

In The Money

A term used to describe an option that has intrinsic value; for a call option, it means the underlying price is above the strike price.

Option Pricing Theory

A framework used in finance to determine the fair value of an option based on factors such as the stock price, strike price, volatility, time to expiration, and risk-free interest rate.