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Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling & admin expenses Net operating income 21,000 21,000 34,000 36,000 78,000 84,000

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Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling & admin expenses Net operating income 21,000 21,000 34,000 36,000 78,000 84,000 6,000 6,000 15,000 15,000 154,000 162,000 6,000 18,000 21,000 38,000 90,000 6,000 15,000 170,000 30,000 b. Using Hi-Lo method, determine the cost formula. c. Prepare a CONTRIBUTION APPROACH Income Statement Morrisey & Brown, Ltd. Income statements For 3 months ending Sept 30 July August September Sales in units 4,000 4,500 5,000 Sales Net operating income a. Identity each item as fixed, varlable or mixed Fixed Variable Mixed 16 Income statements 5 For 3 months ending Sept 30 6 July August September 7 Sales in units 4,000 4,500 5,000 8 9 Sales 400,000 450,000 500,000 10 cost of goods sold 240,000 270,000 300,000 11 Gross margin 160,000 180,000 200,000 12 Selling & Administrative expenses: 13 Advertising expense 21,000 21,000 21,000 14 Shipping expense 34,000 36,000 38,000 15 Salaries and commissions 78,000 84,000 90,000 Insurance expense 6,000 6,000 6,000 17 Depreciation expense 15,000 15,000 15,000 18 Total selling & admin expenses 157.000 162,000 170,000 19 Net operating income 1,000 18,000 30,000 20 21 b. Using Hi-Lo method, determine the cost formula. 22 23 24 25 26 27 28 29 30 31 c. Prepare a CONTRIBUTION APPROACH Income Statement 32 Morrisey & Brown, Ltd. 33 Income statements 34 For 3 months ending Sept 30 35 July August September 36 Sales in units 4,000 4,500 5,000 37 38 Sales 39 40 41 42 43 44 45 46 47 48 Net operating income 49

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