Question 1
Restate the following income statement for a retail company in contribution margin format.
| Sales ($20 per unit) | | $14,000 |
| Less cost of goods sold ($14 per unit) | | 9,800 |
| Gross margin | | 4,200 |
| Less Operating costs: | | |
| Salaries | $2,100 | |
| Advertising | 200 | |
| Rent | 1,000 | |
| Delivery charges ($0.20 per unit) | 1 40 | 3,440 |
| Operating Income | | $ 760 |
Question 2
Pangle Health Food Store sells a variety of herbal supplements and natural skin care items. Pangle purchases the items from leading manufacturers. Identify each of the following costs incurred by Pangle in terms of its cost behavior — variable, fixed, mixed, or step.
| a. | Dried fruits for making "All-natural trail mix" |
| b. | Annual salary for salesclerk |
| c. | Weight loss supplements packaged in bottles of 100 pills per bottle |
| d. | Shipping charges for vitamin tablets (billed in 100-pound increments) |
| e. | Telephone charges (base rate plus usage) |
| f. | Advertising (annual contract with newspaper for one ad per week) |
| g. | Salary for Cindi Pangle (president of company) |
| h. | Sales bonus on body lotions of $1 per 100 sales |
| i. | Sales bonus on body power of $0.10 per item sold |
| j. | Straight line depreciation on store fixtures |
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