Question

South Coast Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. Sales​ (6,000 microwave​ ovens) ​$6,000,000 Cost of goods sold ​870,000 Store​ manager's salary per year ​192,000 Operating costs per year ​305,000 Advertising and promotion per year ​40,000 Commissions​ (4.1% of​ sales) ​246,000 What are the estimated total costs if South​ Coast's store expects to sell​ 8,900 units next​ year? A. ​$2,192,400 B. ​$4,104,950 C. ​$3,567,950 D. ​$901,900

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Sales​ (6,000nits*$1,000) ​$6,000,000

Cost of goods sold ​870,000 (145 a unit)

Store​ manager's salary per year ​192,000

Operating costs per year ​305,000

Advertising and promotion per year ​40,000

Commissions​ (4.1% of​ sales) ​246,000

We will separate in variable and fixed costs:

Fixed costs:

Store​ manager's salary per year ​192,000

Operating costs per year ​305,000

Advertising and promotion per year ​40,000

Variable costs:

COGS= 145*8,900= 1,290,500

Commission= 0.041*(8,900*1,000)= 364,900

Total costs= fixed costs + variable costs

Total costs= $2.192,400