High-Low Method; Contribution Format Income Statement 1. Analyze a mixed cost using the high-low method. 2. Prepare an income statement for a merchandising company using the contribution format. High-Low Method: Contribution Format Income Statement - Excel 5 FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In Calibri - 11 M Paste BIU- E- Cells Editing A % A Alignment Number Conditional Format as Cell Formatting Table Styles Styles fx Clipboard Font B D E F 4 A 1 Jay Corporation has decided to prepare contribution income statements for internal planning. 2 3 Budgeted information for Quarter 1 of Year 3: Sales in units 17.000 5 Sales price per unit $ 48.00 6 7 After analyzing expenses, the company has determined the following cost patterns. 8 Variable Cost of Goods Sold (per unit) 29.00 Sales Commissions (per dollar of sales) 9.50% 10 11 Fixed Manufacturing Overhead (per quarter) 45,000.00 9 2 3 Budgeted information for Quarter 1 of Year 3: 4 Sales in units 17.000 5 Sales price per unit S 48.00 6 7 After analyzing expenses, the company has determined the following cost patterns. 8 Variable Cost of Goods Sold (per unit) $ 29.00 9 Sales Commissions (per dollar of sales) 9.50% 10 11 Fixed Manufacturing Overhead (per quarter) $ 45,000.00 12 Administrative Salaries (per quarter) $ 27,000.00 13 Depreciation Expense (per quarter) $ 36,000.00 14 15 Shipping Cost has been determined to be mixed with the following costs for the past two years: 16 17 Year 1 Total Cost Units 18 Quarter 1 $ 67,000.00 12,500 19 Quarter 2 $ 94,000.00 21.000 20 Quarter 3 $ 89.800.00 13.800 21 Quarter 4 $ 92,600.00 20,000 22 Year 2 23 Quarter 1 $ 72,500.00 13,700 24 Quarter2 $ 80,000.00 14.000 Sheet1 13, 20,000 13,700 14.000 14,300 22,500 Quarter 3 89,MJUU 21 Quarter 4 $ 92,600.00 22 Year 2 23 Quarter 1 $ 72,500.00 24 Quarter 2 $ 80,000.00 25 Quarter 3 $ 84.000.00 26 Quarter 4 $ 100,000.00 27 28 Use the data to answer the following. 29 30 1. Using the high-low method, determine a cost formula for shipping expenses. 32 Total Shipping Cost 33 High level of activity 34 Low level of activity 35 Change in activity 31 Units 36 37 Variable shipping cost per unit per unit 38 40 39 Fixed shipping cost: (Note: please use the highest activity point to compute the total fixed cost.) Total shipping cost at high level of activity Less: Variable shipping cost at high level of activity 42 Total fixed shippine cost Sheet Budgeted Income Statement 48 For Year 3, Quarter 1 49 50 Sales 51 Variable expenses: 52 Cost of goods sold 53 Sales commissions 54 Shipping expense (Variable portion) 55 Total variable expenses 56 Contribution margin 57 Fixed expenses: 58 Fixed Manufacturing Overhead 59 Administrative Salaries 60 Shipping expense (Fixed portion) 61 Depreciation expense 62 Total fixed expenses 63 Net operating income 64 65 66 67
