Question

Problem 5A-7 Cost Behavior; High-Low Method; Contribution Format Income Statement (LO5-10] 0.83 points 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: eBook August 4,500 $ 450,000 270,000 180,000 September 5,000 $ 500,000 300,000 200,000 Print Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 4,000 Sales $ 400,000 Cost of goods sold 240,000 Gross margin 160,000 Selling and administrative expenses: Advertising expense 21,000 Shipping expense 34,000 Salaries and commissions 78,000 Insurance expense 6,000 Depreciation expense 15,000 Total selling and administrative expenses 154,000 Net operating income $ 6,000 References 21,000 36,000 84,000 6,009 15,000 162,000 $ 18,000 21,000 38,000 90,000 6,000 15,000 170,000 $ 30,000 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 Y = a + bx. 3. Redo the company's income statement at the 5,000-unit level of activity using the contribution format.

Answer 1

Ausz O - Expenses Cost of Goods sold Classification Variable Rixed Advertising Expense Shipping Ex pense Salaries and Commistions mixed mixed Proxed * Insurance Expense. Depreciation expense fixed

I Varrable lost lived lost formula and commissions $12 per | $30,000/y=$30,000+ $12 pe Unit Shipping expense $4 l per Unit + 18000 y = $18,000/+ au per Unit . . 500,oto Morrissey & Brown ltd, Income Statement . for the Menth ended Septemba 30 I Sales Variable Expenses & $300,000 Cost of Goods sold & 20,000 shipping Expanse Salasies and Commission expense $ 60,000 $380,000 $ 120,000 146,000 $15,000 Contribution margin fixed expenses Insurance Expense Depreciation expense Adverte sing expense salanes and commiäsion Expense Shipping expense $21.000 $30,000 $18,000 $90,000 $ 30,000 Nit Operating Income
If you have any query ask in comment section. If you like the answer plz rate. Thanks