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Morrisey & Brown, Ltd., of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among
Morrisey & Brown, Ltd., of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in
popularity among Australian consumers. The company's income statements for the three most recent months follow:
MORRISEY & BROWN, LTD.
Income Statements
For the Four Quarters Ending December 31
Quarter 1
Quarter 2
Ouarter
3
Quarter 4
Sales in units
5,500
5,000
6,200
5,600
Sales revenue
A$550,000
A$500,000
A$620.000
A$560.000
Less: Cost of goods sold
330.000
300.000
372,000
336.000
Gross margin
220.000
200,000
248,000
224,000
Less: Operating expenses:
Advertising expense
Shipping expense
Salaries and commissions
Insurance expense
Depreciation expense
Total operating expenses
22,000
38,000
84,000
7,000
16.000
167.000
22.000
40.000
80,000
7,000
16,000
165-000
22,000
44,800
94.400
-7,000
16. 000
184.200
22,000
39,800
90,800
7,000
16,000
175,600
Net income
A$ 53,000 A$ 35,000
A$ 63,800
A$ 48.400
(Note: Morrisey & Brown, Ltd 's Australian-formatted income statement has been recast into the format common in Canada. The
Australian dollar is denoted by A$.)
Required:
1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed.
Expenses
Classification
Cost of goods sold
Advertising expense
Shipping expense
Salaries and commissions
Insurance expense
2-a. Using the high-low method, separate each mixed expense into variable and fixed elements.
Shipping expense
Salaries and commissions expense
& 00:21:48
AS
AS
AS
Variable Cost
4 per unit
12 per unit
per unit
A$
A$
A$
Fixed Cost
20.000
20.000
eBook
2-b. Using the high-low method, state the cost formula for each mixed expense.
Shipping expense
Y= AS
Y= AS
Y= AS
4 + AS
12 + AS
+ AS
20.000 X
20,000: X
3. Redo the company's income statement at the 6,200-unit level of activity using the contribution format.
8
MORRISEY & BROWN. LTD.
Contribution Margin Income Statement
For the Quarter Ended September 30
Sales in units
Sales revenue
Less: Variable expenses:
Cost of goods sold
Shipping expense
Salaries and commissions expense
A$
6.200
620.000
A$
0
620.000
Contribution margin
Less: Fixed expenses:
Advertising expense
Shipping expense
Salaries and commissions expense
Insurance expense
Depreciation expense
Net income
AS
0
620.000
4. Assume that the company's sales are projected to be 5,000 units in the next quarter. Prepare a contribution margin income
statement
4
MORRISEY & BROWN, LTD.
Contribution Margin Projected Income Statement
For the Quarter Ended March 31
8
, 00:21:30
eBook
Sales in units
Sales revenue
Less: Variable expenses:
Cost of goods sold
Shipping expense
Salaries and commissions expense
5,000:
A$
AS
Contribution margin
Less: Fixed expenses:
Advertising expense
Shipping expense
Salaries and commissions expense
Insurance expense
Depreciation expense
Net income
A$
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Cost Accounting Foundations And Evolutions
Authors: Michael R. Kinney, Jenice Prather-Kinsey, Cecily A. Raiborn
6th Edition
0324235011, 978-0324235012
