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11 February, 16:43

South Coast Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. Sales (6,000 microwave ovens) $6,000,000 Cost of goods sold 870,000 Store manager's salary per year 192,000 Operating costs per year 305,000 Advertising and promotion per year 40,000 Commissions (4.1% of sales) 246,000 What are the estimated total costs if South Coast's store expects to sell 8,900 units next year? A. $2,192,400 B. $4,104,950 C. $3,567,950 D. $901,900

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  1. 11 February, 20:19
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    The correct answer is A.

    Explanation:

    Giving the following information:

    Sales (6,000nits*$1,000) $6,000,000

    Cost of goods sold 870,000 (145 a unit)

    Store manager's salary per year 192,000

    Operating costs per year 305,000

    Advertising and promotion per year 40,000

    Commissions (4.1% of sales) 246,000

    We will separate in variable and fixed costs:

    Fixed costs:

    Store manager's salary per year 192,000

    Operating costs per year 305,000

    Advertising and promotion per year 40,000

    Variable costs:

    COGS = 145*8,900 = 1,290,500

    Commission = 0.041 * (8,900*1,000) = 364,900

    Total costs = fixed costs + variable costs

    Total costs = $2.192,400
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