LipDudiu A1 : fic To aid in planning, Jay Corporation is preparing a contribution format income A B D E F 1 To aid in planning, Jay Corporation is preparing a contribution format income statement. 2 3 Budgeted information for Quarter 1 of Year 3: Sales in units 17,000 5 Sales price per unit $ 48.00 4 6 8 7 After analyzing expenses, the company has determined the following cost patterns. Cost of goods sold $ 29.00 per unit 9 Sales commissions 9.50% per dollar of sales 10 11 Administrative salaries 12 Rent expense 13 Depreciation expense 14 $ $ $ 45,000.00 per quarter 27,000.00 per quarter 36,000.00 per quarter 15 Management has concluded that shipping expense is a mixed cost. Units shipped and the related shipping cost over the last eight quarters are: 16 17 Year 1 18 Quarter 1 19 Quarter2 20 Quarter 3 21 Quarter 4 22 Year 2 Duarter 1 Total Shipping Cost $ 67,000.00 $ 94,000.00 $ 89,800.00 $ 92,600.00 Units 12,500 21,000 13,800 20,000 72 500.00 13700 Sheet1 B D E F 15 Management has concluded that shipping expense is a mixed cost. Units shipped and the related shipping cost over the last eight quarters are: 16 17 Year 1 Total Shipping Cost Units 18 Quarter 1 $ 67,000.00 12,500 19 Quarter2 $ 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 25 Quarter 3 $ 84,000.00 14,300 26 Quarter 4 $ 100,000.00 22,500 27 28 Use the data to answer the following. 29 30 1. Using the high-low method, determine a cost formula for shipping expenses. 31 32 Total Shipping Cost Units 33 High level of activity 34 Low level of activity 35 Change in activity 36 A B D E F 41 37 Variable cost per unit 38 39 Compute the fixed cost portion using the high level of activity. 40 Total cost at high level of activity Less: Variable cost element 42 Total fixed cost 43 44 2. Prepare a contribution format income statement for Quarter 1 of Year 3. 45 46 Jay Corporation 47 Budgeted Contribution Format Income Statement 48 For Year 3, Quarter 1 19 50 Sales 51 Variable expenses: 52 Cost of goods sold 53 Sales commissions 54 Shipping expense 55 Total variable expenses 56 Contribution margin 57 Fixed expenses: 58 Administrative salaries 59 Rent expense 60 Shipping expense Sheet1 Sales commissions 54 Shipping expense 55 Total variable expenses 56 Contribution margin 57 Fixed expenses: 58 Administrative salaries 59 Rent expense 60 Shipping expense 61 Depreciation expense 62 Total fixed expenses 63 Net operating income 64 65 66 67 Sheet1
