Reference: 06-12
an Income Statement for Crandall's Bookstore for the First

Multiple Choice

Reference: 06-12
An income statement for Crandall's Bookstore for the first quarter of the current year is presented below:
Crandall's Bookstore
Income Statement
For the First Quarter of the Current Year $$\begin{array} { | l | l | l | } \hline \text { Sales } & & \$ 800,000 \\\hline \text { Less cost of goods sold } & & 560,000 \\\hline \text { Gross margin } & & 240,000 \\\hline \text { Less operating expenses: } & & \\\hline \text { Selling } & \$ 98,000 & \\\hline \text { Administrative } & 98,000 & \underline { 196,000 } \\\hline \text { Net income } & & \$ 44,000 \\\hline\end{array}$$ On average, a book sells for $50. Variable selling expenses are $5.50 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 operating expenses with "X" equal to the number of books sold is

A) Y = $98,000 + $7.00X.
B) Y = $98,000 + $8.50X.
C) Y = $84,000 + $7.00X.
D) Y = $84,000 + $8.50X.