Question

QUESTION IN MARKS The Seniling Sdn Bhd isa merchandiatng firm that ells a single peodut The compuny's revenoes and espumses for the last throe mntha ure given below Chaklempng Sds Bhd Compartive Income Statement For Second Quarter June May 5,250 RM 735,000 294,000 441,000 April 4.500 6,000 Sales in units 840,000 3366000 504,000 Sales revenue Cost of goode sold Gross margis Selling and administrative espenses Shipping expense Advenising expense Salaries and commissions Insurance expense Depreciation espense Net operating income 630,000 252.000 378,000 71,000 70,000 180,500 9,000 42,000 131.500 63,500 70,000 161,750 56,000 70,000 143,000 9,000 42,000 58.000 9,000 42,000 94,750 Required: Determine the mixed expenses from the above scenario. a) (2 marka) b) Construct the cost formulae for the above mixed costs in (a) using high-low method. (9 marks) c) Compute the company's total contribution margin for December. (7 marks)

Answer 1

Answer to Requirement A:

Mixed Expenses:
Shipping Expense
Salaries and Commissions Expense

Answer to Requirement B:

Shipping Expense:

Variable Shipping Expense per unit = (Shipping Expense during June - Shipping Expense during April) / (Sales in units during June - Sales in units during April)
Variable Shipping Expense per unit = (71,000 - 56,000) / (6,000 - 4,500)
Variable Shipping Expense per unit = 10

Fixed Shipping Expense = Shipping Expense during June - Variable Shipping Expense per unit * Sales in units during June
Fixed Shipping Expense = 71,000 - 10 * 6,000
Fixed Shipping Expense = 11,000

Cost Formula for Shipping Expense = 10 * Number of Units Sold + 11,000

Salaries and Commissions Expense:

Variable Salaries and Commissions Expense per unit = (Salaries and Commissions Expense during June - Salaries and Commissions Expense during April) / (Sales in units during June - Sales in units during April)
Variable Salaries and Commissions per unit = (180,500 - 143,000) / (6,000 - 4,500)
Variable Salaries and Commissions per unit = 25

Fixed Salaries and Commissions Expense = Salaries and Commissions Expense during June - Variable Salaries and Commissions Expense per unit * Sales in units during June
Fixed Salaries and Commissions Expense = 180,500 - 25 * 6,000
Fixed Salaries and Commissions Expense = 30,500

Cost Formula for Salaries and Commissions Expense = 25 * Number of Units Sold + 30,500

Answer to Requirement C:

Sales Revenue:

Selling Price per unit = (Sales Revenue during June - Sales Revenue during April) / (Sales in units during June - Sales in units during April)
Selling Price per unit = (840,000 - 630,000) / (6,000 - 4,500)
Selling Price per unit = 140

Cost of Goods Sold:

Variable Cost of Goods Sold per unit = (Cost of Goods Sold during June - Cost of Goods Sold during April) / (Sales in units during June - Sales in units during April)
Variable Cost of Goods Sold per unit = (336,000 - 252,000) / (6,000 - 4,500)
Variable Cost of Goods Sold per unit = 56

Variable Cost per unit = Variable Cost of Goods Sold per unit + Variable Shipping Expense per unit + Variable Salaries and Commissions per unit
Variable Cost per unit = 56 + 10 + 25
Variable Cost per unit = 91

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = 140 - 91
Contribution Margin per unit = 49

Total Contribution Margin for December = Contribution Margin per unit * Number of Units Sold in December
Total Contribution Margin for December = 49 * Number of Units Sold in December