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Management has concluded that shipping expense is a mixed cost. Units shipped and the related shipping cost over he last eight quarters are: Year 2
Management has concluded that shipping expense is a mixed cost. Units shipped and the related shipping cost over he last eight quarters are: Year 2 \begin{tabular}{|l|r|r|r} \hline Quarter 1 & $ & 72,500.00 & 13,700 \\ \hline Quarter2 & $ & 80,000.00 & 14,000 \\ \hline Quarter 3 & $ & 84,000.00 & 14,300 \\ \hline Quarter 4 & $ & 100,000.00 & 22,500 \\ \hline \end{tabular} Use the data to answer the following. 1. Using the high-low method, determine a cost formula for shipping expenses. Total Shipping Cost Units High level of activity Low level of activity Change in activity Variable cost per unit Compute the fixed cost portion using the high level of activity. Total cost at high level of activity Less: Variable cost element Less: Variable cost element Total fixed cost 2. Prepare a contribution format income statement for Quarter 1 of Year 3. Jay Corporation Budgeted Contribution Format Income Statement For Year 3, Quarter 1 Sales Variable expenses: Cost of goods sold Sales commissions Shipping expense Total variable expenses Contribution margin Fixed expenses: Administrative salaries Rent expense Shipping expense Depreciation expense Total fixed expenses Net operating income
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