Answer:
Administrative expense = $17,500
Explanation:
Administrative expense is classified as operating expense. It will be deducted from the gross profit to calculate the Pretax Income.
Sales revenue $90,000
Gross profit $37,000
Selling (distribution) expense ($5,700)
* Administrative expense ($17,500)
Pretax income $13,800
Income tax rate 35% ($4,830)
After Tax Income $8,970
Shares of stock outstanding 2,800
Pretax income is calculated as follow
Pretax Income = Gross profit - Selling (distribution) expense - Administrative expense
$13,800 = $37,000 - $5,700 - Administrative expense
$13,800 = $31,300 - Administrative expense
Administrative expense = $31,300 - $13,800
Administrative expense = $17,500
