Question

1. Analyze a mixed cost using a scattergraph plot and the high-low method. 2. Prepare income statements for a merchandising company using the traditional and contribution formats. NUR . HOME .. INSERT High-Low Method: Contribution Format Income Statement - Excel PAGE LAYOUT FORMULAS DATA REVIEW VIEW ? . x FILE - 6 Sign in AX Calibri 1 BE -A A B Cells Paste B T U . Alignment Number Editing Conditional Format as Cell Formatting Table - Styles Styles Clipboard 1 To aid in planning Jay Corporation is preparing a contribution format income statement. 3 Budgeted information for Quarter 1 of Year 3: 4 Sales in units 5 Sales price per unit 17,000 48.00 7 After analyzing expenses, the company has determined the following cost patterns. 3 Cost of goods sold 29.00 per unit 9 Sales commissions 9.50% per dollar of sales 11 Administrative salaries 12 Rent expense 45,000.00 per quarter 27,000.00 per quarter 36 m narrar Prev 1 of 2 5 Next > to search

Answer 1

ANSWER

As per the given question,

There are 2 sub-parts to the above question.

1. Determination of cost formula using high-low method: High low method is used for bifurcating mixed costs into fixed and variable costs.

Formula for calculating variable cost:     Total cost of high activity - Total cost of low activity

                                                                                Highest activity unit - Lowest activity unit

Formula for fixed costs:

Fixed cost = Total cost - (Variable cost per unit * No. of units)

Calculation of variable and fixed cost using high-low method:

Year	Quarter	Costs	Unit
1	Quarter 1	$                67,000	12,500
1	Quarter 2	$                94,000	21,000
1	Quarter 3	$                89,800	13,800
1	Quarter 4	$                92,600	20,000
2	Quarter 1	$                72,500	13,700
2	Quarter 2	$                80,000	14,000
2	Quarter 3	$                84,000	14,300
2	Quarter 4	$             100,000	22,500
	Highest activity level	$             100,000	22,500
	Lowest activity level	$                67,000	12,500
	Change in activity	$                33,000	10,000
	Variable cost per unit	$ 3.30 per unit
	(100,000 - 67,000) / (22,500 - 12,500) = $ 3.30 per unit

Particulars	Amount
Total cost at highest activity level	$ 100,000
Less: Variable cost element (22,500 units * $3.3 per unit)	($ 74,250)
Total Fixed cost	$ 25,750

2. Contribution income statement for Quarter 1 of year 3

Jay Corporation
Budgeted Contribution Income Statement
For Year 3, Quarter 1
	Working	Amount $	Amount $
Sales	(17,000 units * $ 48 per unit)		$    816,000
Variable expenses:
Cost of goods sold	(17,000 units * $ 29 per unit)	$    493,000
Sales Commissions	($816,000 * 9.5%)	$      77,520
Shipping expense	(17,000 units * $ 3.3 per unit) (refer part 1 of answer for variable cost working)	$      56,100
Total Variable expenses			$    626,620
Contribution margin			$    189,380
Fixed expenses:
Administrative salaries		$      45,000
Rent expense		$      27,000
Shipping expense	Refer part 1 of answer for fixed cost working	$      25,750
Depreciation expense		$      36,000
Total Fixed expenses			$    133,750
Net operating income			$      55,630

THANK YOU FOR THE QUESTION.....KINDLY RATE....IT HELPS ME A LOT