Question

omework Required Saved Het Problem 5A-7 Cost Behavior; High-Low Method; Contribution Format Income Statement (LO5-10) Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow: Morrisey Brown, Ltd. Tacone Statements For the Three Monthe Ended september 30 July August September Sales in unita 5,000 5,500 6.000 Sales $ 625,000 $ 687,500 $750,000 Cost of goods sold 375,000 412,500 450,000 Gross margin 275,000 300,000 Selling and administrative expenses Advertising expense 22.800 22,800 22.800 Shipping expense 46.000 48,800 51,600 Salaries and commissions 92.000 98.400 104,800 Insurance expense 6.050 6.050 Depreciation expense 24,700 24.700 27700 Total selling and administrative expenses 191.550 200.750 209,950 Het operating income $58,450 $ 74,250 $ 90,050 250.000 6,050 Required: 1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold as either variable, fixed, or mixed 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Ya+bX 3. Redo the company's income statement at the 6,000-unit level of activity using the contribution format. < Prev 3 of 3 !! Next Monsters in Fiet.pdf MacBook Air 80 * $ 4 % 5 & 7 2 3 6 8 W E R т Y U O

complete each chart.

Answer 1

Requirement 1 Expenses Cost of Goods Sold Advertising Expense Shipping Expenses Salaries and Commissions Insurance Expense Depreciation Expense Classificiation Variable Expenses Fixed Expenses Mixed Expenses Mixed Expenses Fixed Expenses Fixed Expenses Requirement 2 Particulars Shipping Expense Salaries and Commissions $ $ Variable Cost 5.60 Per Unit 12.80 Per Unit Fixed Cost Formula $ 18,000 Y = $18,000 + $ 5.60 X $ 28,000 Y = $ 28,000 + $ 12.80 X Variable Expense Per Unit = [Cost at Highest Level - Cost at Lowest Level] = [Units at Highest Level - Units at Lowest Level] Fixed Cost Per Unit = Total Cost - [Variable Cost Per Unit * No. of Units] Variable Expense Unit : Shipping Expense = ($ 51,600 - $ 46,000] = [6,000 Units - 5,000 Units] = $ 5.60 Per Unit Salaries and Commissions = [$ 104,800 - $ 92,000] = [6,000 Units - 5,000 Units] = $ 12.80 Per Unit Fixed Expense : Shipping Expense = $ 51,600 - [6,000 Units * $ 5.60 Per Unit] = $ 18,000 Salaries and Commissions = $ 104,800 - [6,000 Units * $ 12.80 Per Unit] = $ 28,000

Requirement 3 Morrisey & Brown Ltd., Income Statement For the Month Ended September 30 Particulars $ Sales $ $ 750,000 Variable Expenses : - Cost of Goods Sold $ - Shipping Expense $ - Salaries and Commissions $ Total Variable Costs 450,000 33,600 76,800 $ 560,400 Contribution Margin $ 189,600 Fixed Expenses : - Advertising Expense - Shipping Expense - Salaries and Commissions $ - Insurance Expense - Depreciation Expense Total Fixed Expenses A A A A A 22,800 18,000 28,000 6,050 24,700 $ 99,550 Net Operating Income $ 90,050