FINC 1001 Management Accounting Fundamentals Professional Task - Part 1: Group Work Each question is worth 15 marks. Question 1: Contribution format income statement and High-Low Method The accounting department of Blackwell Pty Ltd, a merchandising company, has prepared the following analysis: Cost Cost Formula Cost of goods sold $67 per unit Sales commissions 15% of sales Advertising expense $400,000 per month Administrative salaries $200,000 per month Billing expense |? Depreciation expense $95,000 per month The accounting department feels that billing expense is a mixed cost, containing both fixed and variable cost elements. The billing expenses and sales in units over the last several months follow: Units Sold (thousands) Billing Expense January 13 $39,000 February 11 $37,000 March 16 $42,000 17 $44,000 April May 19 $47,000 June 14 $41,000 The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use. Required: a. Using the high-low method, estimate the cost formula for billing expense. Round fixed cost to the nearest whole dollar. Round the variable cost if per thousand units sold to the nearest whole dollar or if per unit sold to the nearest cent. (5 marks) b. Assume that the company plans to sell 35,000 units during July at a selling price of $120 per unit. Prepare a budgeted income statement for the month, using the contribution format. Show all items. (10 marks)