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Arnall Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The companys revenues and expenses (in British pounds) for the last three months are given below: Arnall Ltd Comparative Income Statements For the Three Months Ended June 30 April May June Sales in units 1,700 5,100 6,100 Sales revenue £ 323,000 129,200 £ 969,000 £1,159,000 463,600 Cost of goods sold Gross margin Selling and administrative expenses 387,600 193,800 581,400 695,400 Shipping expense Advertising expense Salaries and commissions 40,300 54,000 93,100 7,600 47,400 81,100 54,000 239,300 7,600 47,400 93,100 54,000 282,300 7,600 47,400 surance expense Depreciation expense Total selling and administrative expenses 242,400 429,400 484,400 Net operating income (loss) £ (48,600)£152,000 £ 211,0003. Redo the companys income statement at the 6,100-unit level of activity using the contribution format. Arnall Ltd Income Statement For the Month Ended June 30 Sales revenue Variable expense s: Cost of goods sold Shipping expense Salaries and commission expense Total variable expenses Contribution margin Fixed expenses Shipping expense Advertising expense Salaries and commission expense Insurance Depreciation Total fixed expenses et operating income

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Shipping expense 34 35 36 37 38 39 40 41 42 43 High Low Method Difference in Shippin Difference In activity nse 93100-40300 6100 -1700 52,800 4,400 45 Variable Cost component 12.00 Per Uni 47 48 49 50 51 52 53 54 Determine the fixed cost component using the high-low method 6,100 93,100 1,700 40,300 Number of Units Sold Total Cost Less Variable component Fixed component (73.200(20.400) (1700*12 19,900 19,90057 Cost formula for Shipping Expense 19900 $12per Unit Sold 59 Salaries & Commission expense 61 High Low Method Difference in Salaries & Commission Expense Difference In activity 63 64 282300 -93100 6100 -1700 189,200 4,400 69 70 71 72 73 74 75 76 Variable Cost component 43.00 Per Unit Determine the fixed cost component using the high-low method 6,100 282,300 1,700 93,100 78 79 80 Number of Units Sold Total Cost Less Variable component Fixed component (262,300)(73,100) (1700*43) 20,000 20,00082 83 84 85 86. Redo the companys income statement at the 6,100-unit level of activity using the contributionformat. ost formula for Salaries & Commission expense 20000 + $43per Unit Sold 87 Arnall Ltd Income Statement 89 90 91 92 93 94 95 96 97 98 For the Three months ending June 30 Sales revenue less: Variable Expenses Cost of goods sold Shipping expense Salaries and commissions Total Variable Costs Contribution Margin Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation expense Total Fixed Costs Net Operating Income 1,159,000 463,600 73.200 262,300 799,100 359,900 100 101 102 103 104 105 106 19,900 54,000 20,000 7.600 47,400 148,900 211,000

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