Question

Concord Window Cleaners' monthly income statement at several levels of activity is Windows washed 2,000 4,2008,200 Sales revenue $ 3,900 $ 8,190 $ 15,990 Cost of goods sold 1,400 2,940 5,740 Gross profit 2,500 5,250 10,250 Operating expenses Advertising expense 400 400 400 Salaries and wages expense 700 920 1,320 Insurance expense 200 200 200 Postage expense 450 945 1,845 Total operating expense 1,750 2,465 3,765 Operating income $ 750 $ 2,785 $ 6,485 (a) Identify each expense as fixed, variable, or mixed. variable Cost of goods sold Advertising Salaries and Wages fixed mixed A Insurance fixed Postage variable

Answer 1

Variable cost per unit and total fixed cost remains same within the relevant range
Cost of goods sold	Variable
Advertising	Fixed
Salaries and Wages	Mixed
Insurance	Fixed
Postage	Variable
Variable salaries and wages per unit = (Difference in cost)/Difference in activity
0.1	per unit
Fixed element	500
	6400	per unit
Sales Revenue	12480	1.95
Variable costs
Cost of goods sold	4480	0.7
Salaries and wages	640	0.1
Postage	1440	0.225
Total variable costs	6560	1.025
Contribution Margin	5920	0.925
Fixed costs:
Advertising	400
Insurance	200
Salaries and wages	500
Total Fixed costs	1100
Net Operating Income	4820