Cherokee Inc. is a merchandiser that provided the following information:

Number of units sold		13,000
Selling price per unit	$	16
Variable selling expense per unit	$	1
Variable administrative expense per unit	$	1.5
Total fixed selling expense	$	19,000
Total fixed administrative expense	$	15,000
Beginning merchandise inventory	$	11,000
Ending merchandise inventory	$	22,000
Merchandise purchases	$	90,000

Required:
1.	Prepare a traditional income statement.

Sales $208,000

Cost of goods sold

Selling and administrative expenses

2.	Prepare a contribution format income statement.

Variable expenses:

Fixed expenses:

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 162,000 kilometers during a year, the average operating cost is 13.2 cents per kilometer. If a truck is driven only 108,000 kilometers during a year, the average operating cost increases to 16.6 cents per kilometer.

Required:
1.	Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places and Fixed cost answer to nearest whole dollar amount.)

Kilometer driven total annual cost

High level of activity

Low level of activity

Change

Variable cost per kilometer

Fixed cost per year

2	Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.)

3.	If a truck were driven 135,000 kilometers during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations.)

Total annual cost