Entertainment Enterprises Entertainment Enterprises, a firm that sells magazine subscriptions, is experiencing increased competition from a number

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Entertainment Enterprises Entertainment Enterprises, a firm that sells magazine subscriptions, is experiencing increased competition from a number of companies. The president, Betty Kincher, has asked you, the controller, to prepare an income statement that will highlight the fixed and variable costs; this will provide more useful information for planning and control purposes. Sales revenues are $25 per subscription. An analysis of company costs for the past six months reveals the following:

image text in transcribedIn addition, the company makes most sales contacts through an extensive telephone network. Consequently, the telephone expense is significant and has both fixed and variable components. Relevant data concerning the telephone expense for the past six months follow:

image text in transcribedPrepare a management report for the president that:
1. Computes the fixed and variable portions of the telephone expense using the high-low method. (Note: A scattergraph may be used to visually check your answer.)

2. Presents a budgeted (pro-forma) contribution margin income statement for Entertainment Enterprises for the next six months (January through June), assuming that it expects to sell 30,000 subscriptions at a price of $25 each.
3. Explains how the information provided in part (2) might help the president make better management decisions.

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Accounting Concepts And Applications

ISBN: 9780324376159

10th Edition

Authors: W. Steve Albrecht, James D. Stice, Earl K. Stice, Monte R. Swain

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