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4 February, 07:16

On average, a book sells for $50. Variable selling expenses are $4 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 selling and administrative expenses with "X" equal to the number of books sold is:

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  1. 4 February, 10:39
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    Sales = $950,000

    Selling Price per book = $50

    Selling Expense = $104,000

    Administrative Expense = $112,000

    Variable Selling Expense per book = $4

    Selling and Administrative Expense = Selling Expense + Administrative Expense

    Selling and Administrative Expense = $104,000 + $112,000

    Selling and Administrative Expense = $216,000

    Variable Administrative Expense per book = 3% * Selling Price per book

    Variable Administrative Expense per book = 3% * $50

    Variable Administrative Expense per book = $1.50

    Variable Selling and Administrative Expense per book = Variable Selling Expense per book + Variable Administrative Expense

    Variable Selling and Administrative Expense per book = $4.00 + $1.50

    Variable Selling and Administrative Expense per book = $5.50

    Number of books sold = Sales / Selling Price per book

    Number of books sold = $950,000 / 50

    Number of books sold = 19,000

    Variable Selling and Administrative Expense = Variable Selling and Administrative Expense per book * Number of books sold

    Variable Selling and Administrative Expense = $5.50 * 19,000

    Variable Selling and Administrative Expense = $104,500

    Fixed Selling and Administrative Expenses = Selling and Administrative Expense - Variable Selling and Administrative Expense

    Fixed Selling and Administrative Expenses = $216,000 - $104,500

    Fixed Selling and Administrative Expenses = $111,500

    Cost formula for Selling and Administrative Expenses is:

    Y = $5.50 * X + $111,500, where Y is Selling and Administrative Expense and X is number of books sold
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