Question

Morrisey & Brown, Ltd, of Sydney, Australia is a merchandising firm 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 CHECK FIGURE (2) Shipping: A$18.000 per month plus A54 per un MORRISEY & BROWN, LTD. Income Statements For the Three Months Ending September 30 July August September Sales in units 4 000 4 500 Sales revenue A$400,000 5,000 AS500,000 300.000 200.000 Less: Cost of goods sold Gross margin AS450,000 270,000 - 180.000 240.000 160.000 Less: Operating expenses Advertising expense Shipping expense 21.000 21,000 34,000 78,000 21.000 36,000 84.000 Salaries and commissions Insurance expense 6,000 6,000 38,000 90,000 6,000 15.000 170.000 Depreciation expense 15.000 15.000 Total operating expenses 154.000 AS 6.000 162.000 AS 18.000 Net income AS 30,000 (Note: Morrisey & Brown, Ltd's Australian-formatted income statement has been recast into the format common in Canada. The Australian dollar is denoted by AS.) Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed 2. com m erce 3. Redo the company's income statement at the 5,000-unit level of activity using the contribution format

urgent solution

Answer 1

Ques 1
Cost of goods sold .................. Variable Advertising expense................ Fixed Shipping expense ................... Mixed Salaries and commissions........ Mixed Insurance expense.................. Fixed Depreciation expense.............. Fixed
Ques 2
Income statement
Sales		500000
Variable Expenses:
Cost of goods sold
(5000*60)	300000
Shipping expense
(5000*4)	20000
Salaries and commission expense
(5000*12)	60000	380000
Contribution Margin		120000
Fixed expenses
Advertising expense	21000
Shipping expense	18000
Salaries and commission expense	30000
Insurance expense	6000
Depreciation expense	15000	90000
Net operating income		30000