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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: August 8,500 $ 892,500 535,500 357,000 September 9,000 $ 945,000 567,000 378,000 Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 8,000 Sales $ 840,000 Cost of goods sold 504,000 Gross margin 336,000 Selling and administrative expenses: Advertising expense 36,600 Shipping expense 95,000 Salaries and commissions 145,000 Insurance expense 8,850 Depreciation expense 24,400 Total selling and administrative expenses 309,850 Net operating income $ 26,150 36,600 100,200 152,600 8,850 24,400 322,650 $ 34,350 36,600 105,400 160,200 8,850 24,400 335,450 $ 42,550 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 9,000-unit level of activity using the contribution format. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Redo the company's income statement at the 9,000-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Variable expenses: Salaries and commissions expense 0 0 Fixed expenses: Shipping expense Salaries and commissions expense Insurance expense Depreciation expense 0 $ 0
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