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

question 176

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 traditional income statement for the month of June,what would be his gross profit?

• A)$260,000
• B)$160,000
• C)$60,000
• D)$100,000

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Definitions:

Price Elasticity

An indication of the extent to which the demand or supply of a product alters following a variation in its price.

Substitutes

Products or services that can be used in place of each other, where the increase in price of one leads to an increase in demand for the other.

Complements

Items or services used together, where the use of one increases the demand for the other.

Consumer Surplus

The variance between the aggregate amount consumers intend and can afford to pay for a good or service and the total they actually do pay.