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Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian
Morrisey & Brown, Ltd., of Sydney is a merchandising company 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: September 6,500 Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 5,500 Sales $ 577,500 Cost of goods sold 346,500 Gross margin 231,000 Selling and administrative expenses: Advertising expense 24, 200 Shipping expense 57,000 Salaries and commissions 104,000 Insurance expense 9,200 Depreciation expense 19,600 Total selling and administrative expenses 214,000 Net operating income $ 17,000 August 6,000 $ 630,000 378,000 252,000 $ 682,500 409,500 273,000 24,200 60,200 110,600 9,200 19,600 223,800 $ 28,200 24, 200 63,400 117,200 9,209 19,600 233, 600 $ 39,400 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 company's income statement at the 6,500-unit level of activity using the contribution format
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