Marwicks Pianos, Incorporated, purchases pianos from a large manufacturer for an average cost of $1,495 per unit and then sells them to retail customers for an average price of $3,300 each. The companys selling and administrative costs for a typical month are presented below:

Costs	Cost Formula
Selling:
Advertising	$939 per month
Sales salaries and commissions	$4,811 per month, plus 4% of sales
Delivery of pianos to customers	$57 per piano sold
Utilities	$654 per month
Depreciation of sales facilities	$4,906 per month
Administrative:
Executive salaries	$13,421 per month
Insurance	$685 per month
Clerical	$2,459 per month, plus $44 per piano sold
Depreciation of office equipment	$886 per month

During August, Marwicks Pianos, Incorporated, sold and delivered 65 pianos.

Required:

1. Prepare a traditional format income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin.

Morrisey & Brown, Limited, of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The companys income statements for the three most recent months follow:

Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30
	July	August	September
Sales in units	8,000	8,500	9,000
Sales	$ 840,000	$ 892,500	$ 945,000
Cost of goods sold	504,000	535,500	567,000
Gross margin	336,000	357,000	378,000
Selling and administrative expenses:
Advertising expense	36,600	36,600	36,600
Shipping expense	95,000	100,200	105,400
Salaries and commissions	145,000	152,600	160,200
Insurance expense	8,850	8,850	8,850
Depreciation expense	24,400	24,400	24,400
Total selling and administrative expenses	309,850	322,650	335,450
Net operating income	$ 26,150	$ 34,350	$ 42,550

Required:

1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed.

2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bX.

3. Redo the companys income statement at the 9,000-unit level of activity using the contribution format.

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Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of its car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Month	Rental Returns	Car Wash Costs
January	2,400	$ 11,100
February	2,500	$ 13,200
March	2,700	$ 11,900
April	3,000	$ 14,400
May	3,600	$ 16,300
June	5,100	$ 23,500
July	5,500	$ 22,300
August	5,500	$ 22,400
September	4,700	$ 22,900
October	4,000	$ 21,400
November	2,200	$ 10,800
December	2,800	$ 14,600

Marwick's Pianos, Incorporated Traditional Income Statement For the Month of August Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses: Advertising Sales salaries and commissions Delivery of pianos Utilities Depreciation of sales facilities 0 Total selling expenses Administrative expenses: Executive salaries Insurance Clerical Depreciation of office equipment Advertising Sales salaries and commissions Delivery of pianos Utilities Depreciation of sales facilities 0 Total selling expenses Administrative expenses: Executive salaries Insurance Clerical Depreciation of office equipment Total administrative expenses o 0 Total selling and administrative expenses 0 Net operating income Required: 1. Prepare a traditional format income statement for August. 2. Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a contribution format income statement for August. Show costs and revenues on both a total and a per unit basis down through contribution margin. (A "Net operating loss" should be entered as a negative number.) Marwick's Pianos, Incorporated Contribution Format Income Statement For the Month of August Total Per Piano Variable expenses: Total variable eynensee 0 Required 1 Required 2 Required 3 By analyzing the data from the company's income statemen either variable, fixed, or mixed. Classification Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Required 1 Required 2 Required 3 Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bx. (Round the Variable cost per unit to 1 decimal place.) Variable Cost Fixed Cost Formula per unit Y = + XX per unit Y= + X Redo the company's income statement at the 9,000-unit level of activity using the contribution format. Morrisey & Brown, Limited Income Statement For the Month Ended September 30 Variable expenses: Fixed expenses: 2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.) Fixed cost per month Variable cost per rental return