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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: Cost Cost Formula Cost of good sold $26 per unit sold $176,000 per quarter Advertising expense 8% of sales Sales commissions Shipping expense Administrative salaries $86,000 per quarter $9,600 per quarter Insurance expense Depreciation expense $56,000 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: Shipping Units Sold Expense Quarter Year 1 22,000 166,000 First Second 24.000 181,000 Third 29,000 $223,000 Fourth 25.000 186,000 Year 2: First 23.000 176,000 Second 26,000 191,000 Third 34,000 $238,000 Fourth 31,000 $214,000 s president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter
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