An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement For Quarter Ended March 31 Sales $ 960,000 Cost of goods sold 670,000 Gross margin 290,000 Selling and administrative expenses Selling $ 108,000 Administration 120,000 228,000 Net operating income $ 62,000 On average, a book sells for $60. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:

The net operating income used in contribution approach the first quarter is 171600

Explanation:

Description                        Amount                                     Amount

Sales                                                                             960000

Variable expenses:  

Cost of good sold                 670000  

Variable selling                       80000

(5 per book*16000 books)      

Variable administrative           38400

(960000*4%)            

Total variables expenses                                                 788400

contribution margin                                                           171600

working note:

unit sales=960000/60 per book=16000 book

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