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ACME Plumbing Incorporated has the exclusive franchise to purchase a product from the ma planning, the company has decided to start using a contribution format
ACME Plumbing Incorporated has the exclusive franchise to purchase a product from the ma planning, the company has decided to start using a contribution format income statement. To have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas and distribute it on the retail level. As an aid in Cost Cost Formula Cost of good sold 34 per unit sold $190,000 per quarter 7% of sales Sales commissions ng expensee trative salaries $100,000 per quarter $11,000 per quarter $70,000 per quarter Management has concluded that shipping expense is a mixed cost expense over the last eight quarters follow both variable and fixed cost elements. Units sold and the related shipping Units Sold Year1 First $180.000 S 195,000 $237.000 $200.000 36.000 38,00O 43.00O 39,000 Third Fourth Year 2 First 37.000O 40,000 54,00O 51,000 $ 190.000 $205,000 $252.000 $228,000 Third Fourth ACME's president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter 2 In the first quarter of Year 3, the company plans to sell 43,000 units at a selling price of $67 per unit. Prepare a contribution format income statement for the quarter. (De not round your intermediate calculations) Required: 1. Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quariers abo Format Income Statement For the First Shipping Units SoldExpense High activity leve Low activity level Change Varable cost per unit per unit Total variable expenses Fixed cost element Fixed expenses: Total Exed expenses
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