Biology Forums - Study Force

The University Store, Incorporated is the major bookseller for four nearby colleges. An income statement for the first quarter of the year is presented below:

University Store, Incorporated
Income Statement
For the Quarter Ended March 31
Sales		$ 800,000
Cost of goods sold		560,000
Gross margin		240,000
Selling and administrative expenses
Selling	$ 100,000
Administrative	110,000	210,000
Net operating income		$ 30,000

On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of the administrative expenses are fixed.

If 25,000 books are sold during the second quarter and this activity is within the relevant range, the company's expected contribution margin would be:

▸ $875,000

▸ $300,000

▸ $175,000

▸ $65,000

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