Question

Jean's Fitness Club provides monthly memberships as well as personal training sessions. The personal trainers earn 50% of the revenue for all personal training sessions. The Fitness Club also sells nutrition products. Jean's general ledger accounts indicate the following for the year. The front desk staff wages expense remains the same throughout the year.
Account Amount Account Amount
Membership revenue $140,000 Personal trainer wages expense _____
Personal training revenue $75,000 Space rental expense $11,000
Product Sales $65,000 Straight line depreciation expense $6,000
Cost of Product sold $35,000 Rental insurance expense $3,000
Front desk staff wages expense $12,000


If a contribution margin income statement is prepared for the year, what is operating income?

a. $207,500

b. $280,000

c. $175,500

d. $384,500

Answer 1

Answer:

c. $175,500

Explanation:

Revenue                                                        $140,000

Training revenue                                          $75,000  

Product Sales                                               $65,000  

Total Revenue                                              $280,000

Variable Expenses

Personal trainer wages expense $70,000

Cost of Product sold                     $35,000

Total Variable Cost                                       ($105,000)

Contribution margin / operating income     $175,000

Fixed Costs

Space rental expense                  $11,000

Depreciation expense                 $6,000

Rental insurance expense           $3,000

Front desk staff wages expense $12,000

Total Fixed cost                                             ($32,000)

Net Income                                                    $143,000