Given Data P02-18: FRANKEL LTD. Comparative Income Statements For the Three Months Ended June 30 Sales in units April 3,000 May June 3,750 4,500 Sales revenue 420,000 525,000 630,000 Cost of goods sold 168,000 210,000 252,000 Gross margin 252,000 315,000 378,000 Selling and administrative expenses: Shipping expense 44,000 50,000 56,000 Advertising expense 70,000 70,000 70,000 Salaries and commissions 107,000 125,000 143,000 Insurance expense 9,000 9,000 9,000 Depreciation expense 42,000 42,000 42,000 Total selling and administrative expenses: 272,000 296,000 320,000 Net operating income (loss) - 20,000 19,000 58,000 Cost of goods sold Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation expense Analysis of the mixed expenses: FRANKEL LTD. Analysis of Expenses High level of activity Low level of activity Change Variable cost element: Shipping expense Salaries and commission expense Fixed cost element: Shipping Units Expense Salaries & Comm. Exp. Try again! Try again! Try again! Change in Cost Change in Activity Variable Rate #DIV/01 #DIV/01 #DIV/0! #DIVIO! Shipping Expense Salaries & Comm. Exp. Cost at high level of activity Less variable cost element E Try again! Try again! The cost formulas are: Shipping expense Salaries and commission expense Sales in units Sales revenue Variable expenses: Cost of goods sold Shipping expense Salaries & comm. expense Contribution margin Fixed expenses: Shipping expense Advertising expense FRANKEL LTD. Income Statement For the Month Ended September 30 Salaries and commissions exp. Insurance expense Depreciation expense Net operating income Try again