Question

Frankel Company

Traditional Income Statement

For the 3 months ending September 30, 2020 1. Use the high low method to determine the cost equation for each item on the income statement. 2. Using the cost equations, create the contribution income statement for 5,000 units. 3. Using the cost equations, create the contribution income statement for 4,800 units.

B C D E 1 Frankel Company 2 Traditional Income Statement 3 For the 3 months ending September 30, 2020 4 5 6 Sales in units July 4,000 August 4,500 September 5,000 7 8 Sales $ 400,000 $ 450,000 $ 500,000 9 Cost of goods sold 240.000 270,000 300,000 10 Gross Margin 160,000 180,000 200,000 11 Selling & Administrative Expenses: 12 Advertising 21,000 21,000 21,000 13 Shipping 34,000 36,000 38,000 14 Salaries and commissions 78,000 84,000 90,000 15 Insurance 6,000 6,000 6,000 16 Depreciation 15.000 15.000 15.000 17 Total Selling & Administrative Expenses 154.000 162,000 170,000 18 19 Net Operating Income $ 6,000 18,000 $ 30.000 20 21 22 Required: 23 1. Use the high low method to determine the cost equation for each item on the income statement. 24 2. Using the cost equations, create the contribution income statement for 5,000 units. 25 3. Using the cost equations, create the contribution income statement for 4,800 units. 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Sheet1 Ready

Answer 1

DATE 4869 wit Sooo units Particulars vy unit 420000 Soooo too 60 y 12 76 724 300000 20000 60000 380000 120000 277000 19200 57600 364800 115200 21000 Sales (-) VariableCosts: COGS Shiffing Schlary of comm Total Variable Cost Contribution (-) Fined Costs: Advertising Shiffing Insurance Depreciation Total fired Costs Net Income 21000 18000 30000 6000 Salary of comm. 18000 30000 6000 Sooo 90000 30000 5000 9000D 23201

DATE For Insurance : 6000 6000 5000 - 4ooo Variable cost unit = $olunid Equation: 6000 = Fined cast + $0x4000) fined cost = $6000 For Depreciation: Variable Cost/ unit to/unit I sooo - 15000 Sooo - YouD Equation: I sooo = fined cost + (80 x 4000 fined Cost = $15000

PNGENO DATE: For shipping: Variable costſ unit = 38000 - Syooo - Yooo цоо о Jooo ססס = $u/unit + хчооо Equation: 34000 =fined Cost (84xy fined cost = 34000 - 16000 = $18000 For salaries & Commission: Variable cost = 90000 .78000 5000 - 4ooo 12000 - ס סטן = $12/unit Equation: 78000 = 12 X fined cast = 78000 48000 =430000

WONO CATE 1 Cost Equation: Total Cost = fined cost +Variable Cost / unit High Low Method- Higher cost-lower Cost Higher Activity-lower er Activity x Total Units For COGS: Variable Cost / unit = 300000 - 240000 5000 – 4000 60000 סטט| = $60/unit Equation: 240000 = fined cost + ($60 x 400 Fixed Cost=0 хоро 21000 - 2100 Jouo- yooo For Advertising : Variable cost/ unit = $0/unit Equation : 21000 = lined cast + (80 x 4000) fined cost = $21000