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