Question
Bath Bomb Delight Co. manufactures organic bath bombs. The company's income statements for the last two years are given below: 2020 2021 Units sold 102,000
Bath Bomb Delight Co. manufactures organic bath bombs. The company's income statements for the last two years are given below:
2020 | 2021 | |
Units sold | 102,000 | 93,000 |
|
| |
Sales | $ 1,014,900 | $ 925,350 |
Cost of goods sold | 550,000 | 501,270 |
Gross margin | 464,900 | 424,080 |
Selling expenses | 185,000 | 179,000 |
Administrative expenses | 65,000 | 65,000 |
Net income | 214,900 | 180,080 |
The company has no beginning or ending inventories.
Required:
a. Use the high-low method to determine the cost formula for the selling expenses, which are a mixed cost. When performing calculations round to the nearest cent (i.e. $6.94222 = $6.94) (5 marks)
b. The company expects to sell 108,000 units next year. Prepare the budgeted income statement using the contribution format for this level of activity. No heading required. (7 marks)
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