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2.CEC Corporation distributes paper cups. CEC owns some shipping equipment whose costs are sometimes lumped in with Shipping Expense. Below is a comparative income statement
2.CEC Corporation distributes paper cups. CEC owns some shipping equipment whose costs are sometimes lumped in | ||||
with Shipping Expense. Below is a comparative income statement listing the last three months activity. | ||||
CEC Corportion | ||||
Comparative Income Statement | ||||
Three Months Ending March 31, 2013 | ||||
January | February | March | ||
Sales in Units | 6,000 | 8,000 | 10,000 | |
Sales Revenue | $690,000 | $920,000 | $1,150,000 | |
Cost of Goods Sold(100% Varible) | $414,000 | $552,000 | $690,000 | |
Gross Margin | $276,000 | $368,000 | $460,000 | |
Selling & Administrative Expenses: | ||||
Shipping Expense | $34,000 | $42,000 | $49,000 | |
Advertising Expense | $65,000 | $65,000 | $65,000 | |
Salaries & Commission Expense | $110,000 | $125,000 | $135,000 | |
Insurance Expense | $12,000 | $12,000 | $12,000 | |
Depreciation Expense | $5,000 | $5,000 | $5,000 | |
Total Selling & Administrative Expense | $226,000 | $249,000 | $266,000 | |
Net Operating Income | $50,000 | $119,000 | $194,000 | |
Required: | ||||
1. Using the high-low method, separate the mixed expenses (Shipping Expense and Salaries and Commission Expense) | ||||
into variable and fixed components | ||||
2. Redo the company's income statement at the 10,000 unit level of activity using the contribution approach format |
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