Question

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $800. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1900 a month rent for his store, and also pays $5000 a month to his staff in addition to the commissions. Stanley sold 150 bicycles in June. If Stanley prepares a traditional income statement for the month of June, what would be his operating income?

Answer 1

Answer:

Net Income                               5,100

Explanation:

Sales Revenue 150x800 = 120,000

Cost of goods sold 150x600=90,000

Gross Profit                              30,000

Rent expense           1900

selling expense       23,000 (120,000 x 15% + 5000)

Tota expenses                        24,900

Operation Income                     5,100

Under a traditional income statment, the selling expense will be period cost, They will be subtracted form the gross profit entirely.