Question
Milden Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning,
Milden Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning, the company has decided to start using a contribution format income statement. To have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas: CostCost Formula Cost of good sold $22 per unit sold Advertising expense $172,000 per quarter Sales commissions 5% of sales Shipping expense ? Administrative salaries $82,000 per quarter Insurance expense $9,200 per quarter Depreciation expense $52,000 per quarter Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters follow: Quarter Units Sold Shipping Expense Year 1: First 18,000 $ 162,000 Second 20,000 $ 177,000 Third 25,000 $ 219,000 Fourth 21,000 $ 182,000 Year 2: First 19,000 $ 172,000 Second 22,000 $ 187,000 Third 30,000 $ 234,000 Fourth 27,000 $ 210,000 Milden Company |
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