Question

Question # 3-16

ntenance cost. (Hint the maintenance pervisory salaries, how The con 246.000 46.000 echin the Tentenance Rewind ermine how much and fixed costomula for ma evel of 75,000 mac Estimate how much of the $216.000 af overhead cost in July was maintenan First determine how much of the 5246.000 consisted of utilities and supervi out the behaviour of variable and fixed costs within the relevant range.) sing the high-low method estimate a cost formula for maintenance. press the company's head cost in the form a+ x. What total overhead nur w o espect to he incurred at an activity level of Express the company's total come Stateme hours r ich-Low Method: Contribution Format Incom ail store and its al PROBLEM. IC B MOLLO LOU Site World is a merchandi More Rults for the e t sal skaleboards both at its retail store a ths are below. n September July August 5.000 4,000 $100,000 240,000 160,000 4,500 $450,000 270,000 180,000 $500,000 300.000 200.000 21.000 Sales in units Sales .......... Cost of goods sold..... Gross margin.......... Selling and administrative expenses Advertising expense.......... Shipping expense......... Salaries and commissions.. Insurance expense Depreciation expense..... Total selling and administrative.... Operating income................. 21.000 34,000 78,000 6,000 15,000 154,000 $ 6,000 21,000 36,000 84,000 6,000 15,000 162.000 $ 18,000 38.000 90,000 6,000 15,000 170,000 $ 30,000 Required: 1. Identify cach of the company's expenses (including cost of goods sold) as either variable. Tie mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements the cost formula for each mixed expense, 3. Redo the company's income statement for September using the contribution format. ble and fixed elements. Sut PROBLEM 3-17 High-Low Method; Predicting Cost (L01, LO2) Colby Limited is a manufacturing company whose total factory overhead costs fluctuate som year to year, according to the number of machine-hours worked in its production facility. high and low levels of activity over recent years are given below: cluate somewhat from facility. These costs

Answer 1

Classification Variable Fixed Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Mixed Mixed Fixed Fixed Shipping expense Salaries and commissions expense Variable Cost Fixed Cost $4.00 $18,000 $12.00 $30,000 Formula Y= $18,000+ $4 * X Y= $30,000+ $12*X Workings: Units Shipping Expense Salaries and Commissions Expense $90,000 $78,000 $12.000 High level of activity Low level of activity Change in activity 5,000 4,000 1.000 $38.000 $34.000 $4,000 $4.00 $12.00 Variable cost (Change in cost / Change in activity) $38.000 $90,000 Fixed cost: Cost at high level of activity Less: Variable cost (S4 * 5,000) ($12 * 5,000) Fixed Cost $20.000 $60.000 $30,000 $18.000 Note: Y is the monthly cost & X denotes units sale. 3) $500,000 Skate world Income Statement For the Month Ended September 30 Sales Variable expenses Cost of goods sold $300.000 Shipping expense $20,000 Salaries and commissions expense $60.000 $380,000 $120.000 Contribution margin Fixed expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense $21,000 $18.000 $30,000 $6,000 $15,000 $90.000 $30,000 Net operating income