Question

P20-2B Deco-Lampz Ltd. is a small company that sells decorative lamps to decorators and consumers. The company's income statements for the last three months are shown below; Analyze cost behaviour and prepare CVP income statement. (TO 1, 3 AN September October August 300 260 200 Sales in units $45,00 24,000 21,000 ) $39.000 430,00 Sales revenue 20,80K) 16,000 Cost of goods sold CTUss profit Operating expenses Salaries and wges cxpense Depruciation expenses Shipping expense Ofice expense 18,200 14,00 6,170 3,90 58 1,400 6,350 580 l al 2,L00 580 1,820 170 150 120 8,00 $ 6.000 8,720 9,200 Thtal operating expeilscs Incnme Irom uperation S11.800 $ 9,480 Instructions (a) Identify euch of the company's expenses (inclhuding cust of guods sold) as being variahle, fixed, or mixed. (b) alculate the cost per unit for each of the variable expenses (c) Using the high low mehod, determine the variable cost per unil and the fixed cost connponent for each of the mixud osts (di Management lhas projected uat the sales volume in Nuvember will increase to 4010 lamps. Using the cost in- formatim deternmined above, prepare a CVP income statement up to income from operations for November. Show expense items individually.)

Answer 1

a)

Cost of Goods Sold	Variable
Salaries and wages Expense	Mixed
Depreciation Expense	Fixed
Shipping Expense	Variable
Office Expense	Mixed

b)Variable cost per unit

=Cost of Goods Sold = 16,000/200 = 80 Per unit

Shipping Expense = 1,400/200 = 7 Per unit

C)Salaries and wages Expense

Variable cost = (6,350 - 5,900)/(300 - 200)

=4.5 Per unit

Fixed Cost = 6,350 - (300 x 4.5)

=5,000

Office Expense

Variable Cost = (170 - 120)/(300 - 200)

=0.50 Per unit

Fixed Cost = 170 - (300 x 0.50)

=20

d)

Sales	60,000.00
Cost of Goods Sold	32,000.00
Gross Profit	28,000.00
Operating Expenses
Salaries and wages Expense	6,800.00
Depreciation Expense	580.00
Shipping Expense	2,800.00
Office Expense	220.00
Total Operating Expense	10,400.00
Income from Operations	17,600.00