Question

On average, a book sells for $50. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed. The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:

Answer 1

Answer:

Sales = $950,000

Selling Price per book = $50

Selling Expense = $104,000

Administrative Expense = $112,000

Variable Selling Expense per book = $4

Selling and Administrative Expense = Selling Expense + Administrative Expense

Selling and Administrative Expense = $104,000 + $112,000

Selling and Administrative Expense = $216,000

Variable Administrative Expense per book = 3% * Selling Price per book

Variable Administrative Expense per book = 3% * $50

Variable Administrative Expense per book = $1.50

Variable Selling and Administrative Expense per book = Variable Selling Expense per book + Variable Administrative Expense

Variable Selling and Administrative Expense per book = $4.00 + $1.50

Variable Selling and Administrative Expense per book = $5.50

Number of books sold = Sales / Selling Price per book

Number of books sold = $950,000 / 50

Number of books sold = 19,000

Variable Selling and Administrative Expense = Variable Selling and Administrative Expense per book * Number of books sold

Variable Selling and Administrative Expense = $5.50 * 19,000

Variable Selling and Administrative Expense = $104,500

Fixed Selling and Administrative Expenses = Selling and Administrative Expense - Variable Selling and Administrative Expense

Fixed Selling and Administrative Expenses = $216,000 - $104,500

Fixed Selling and Administrative Expenses = $111,500

Cost formula for Selling and Administrative Expenses is:

Y = $5.50 * X + $111,500, where Y is Selling and Administrative Expense and X is number of books sold