Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 companys income statements for the three most recent months follow:

Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30
July August September
Sales in units 4,000 4,500 5,000
Sales $400,000 $450,000 $500,000
Cost of goods sold

240,000

270,000 300,000
Gross margin 160,000 180,000 200,000
Selling and administrative expenses:
Advertising expense 21,000 21,000 21,000
Shipping expense 34,000 36,000 38,000
Salaries and commissions 78,000 84,000 90,000
Insurance expense 6,000 6,000 6,000
Depreciation expense 15,000 15,000 15,000
Total selling and administrative expenses 154,000 162,000 170,000
Net operating income $ 6,000 $ 18,000 $ 30,000

Required:
1.

Identify each of the companys 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. State the cost formula for each mixed expense.

3.

Redo the companys income statement at the 5,000-unit level of activity using the contribution format.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso

11th Edition

111856667X, 978-1118566671

More Books

Students also viewed these Accounting questions

Question

CL I P COL Astro- L(1-cas0) Lsing *A=2 L sin(0/2)

Answered: 1 week ago