House Station, Inc., is a nationwide hardware and furnishings chain. The manager of the

House Station Store in Portland is evaluated using ROI. House Station headquarters

requires an ROI of 10 percent of assets. For the coming year, the manager estimates

revenues will be $2,340,000, cost of goods sold will be $1,467,000, and operating

expenses for this level of sales will be $234,000. Investment in the store assets

throughout the year is $1,687,500 before considering the following proposal.

A representative of Sharps Appliances approached the manager about carrying Sharps

line of appliances. This line is expected to generate $675,000 in sales in the coming year

at the Portland House Station store with a merchandise cost of $513,000. Annual

operating expenses for this additional merchandise line total $76,500. To carry the line of

goods, an inventory investment of $495,000 throughout the year is required. Sharps is

willing to floor plan the merchandise so that the House Station store will not have to

invest in any inventory. The cost of floor planning would be $60,750 per year. House

Stations marginal cost of capital is 10 percent. Ignore taxes.

C) what is the Sale Revenue if using the Floor Plan Option

What is the cost of Sales

Gross profit is $724,500

This is Question 14-44 in the book Fundamentals of Cost Accounting 4th Edition