Question
Frankel Company Traditional Income Statement For the 3 months ending September 30, 2020 July August September Sales in units 4,000 4,500 5,000 Sales $400,000 $450,000
Frankel Company
Traditional Income Statement
For the 3 months ending September 30, 2020
July August September
Sales in units 4,000 4,500 5,000
Sales $400,000 $450,000 $500,000
Cost of goods sold 240,000 270,000 300,000
Gross Margin 160,000 180,000 200,000
Selling & Administrative Expenses:
Advertising 21,000 21,000 21,000
Shipping 34,000 36,000 38,000
Salaries and commissions 78,000 84,000 90,000
Insurance 6,000 6,000 6,000
Depreciation 15,000 15,000 15,000
Total Selling & Administrative Expenses 154,000 162,000 170,000
Net Operating Income $6,000 $18,000 $30,000
Required:
1. Use the high low method to determine the cost equation for each item on the income statement.
2. Using the cost equations, create the contribution income statement for 5,000 units.
3. Using the cost equations, create the contribution income statement for 4,800 units.
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