10")

Assume a merchandising company uses the high-low method to separate any mixed costs into their variable and fixed elements. It provided the following income statements:

	May	June	July
Sales in units	4,800	5,000	5,500
Sales	$ 168,000	$ 175,000	$ 192,500
Cost of goods sold	86,400	90,000	99,000
Gross margin	81,600	85,000	93,500
Selling and administrative expenses:
Advertising	17,000	17,000	17,000
Shipping	16,800	17,500	19,250
Salaries and commissions	29,600	30,000	31,000
Total selling and administrative expenses	63,400	64,500	67,250
Net operating income	$ 18,200	$ 20,500	$ 26,250

What is the estimated net operating income if the company sells 5,200 units?

9)

Assume that a company operates a fleet of delivery trucks. If a truck is driven 80,000 miles during a year its average operating cost is 25 cents per mile. If a truck is driven only 60,000 miles during the year, its average operating cost is 30 cents per mile. Using the high-low method, what would be the total estimated operating cost if a truck is driven 67,600 miles per year?

Multiple Choice

$17,360

$19,360

$19,160

$18,760