Page of 3 Edwards & Shaw is a merchandising company that is the sole distributor of a product that is increasing in popularity. The company's income statement for the three most recent months is listed below. Edwards and Shaw Income Statement For the Three Months Ending September July 4,500 August 5,000 September 6,000 Sales in Units Sales Revenue $675,000 275,000 400,000 $750,000 300,000 450,000 $900,000 350,000 550,000 Cost of Goods Sold Gross Margin Operating Expenses: Advertising Expense Shipping Expense Salaries and Commissions Legal Expense Depreciation Expense To Operating Expenses Operating Income 11,000 27,000 127,500 7,000 10,000 182,500 $217,500 11,000 30,000 135,000 7,000 10,000 193,000 $257,000 11,000 36,000 150,000 7,000 10,000 214,000 $336,000 Un mixed cost. 2. Using the high-low method, separate each of the individual mixed cost into the variable and fixed elements. State the cost equation for each individual mixed costs. 3. Edwards and Shaw expect to sell 6,500 units in October. Prepare an absorption income statement for October 4. Prepare a Contribution Margin Income Statement based on October sales of 6,500 units. Do not combine expenses but show each expense separately in the appropriate category. 5. Calculate the contribution margin per unit and the variable cost ratio. 6. How many units would need to be sold to generate $350,000 in target income? (Round your answer to the nearest unit using the Excel Round Up function.) 2) Using the high-low method, separate each of the mixed expenses into variable and fixed elements. State the cost equation for each mixed cost. You may have more than one mixed cost. Variable Rate Fixed Cost Cost Formula It's Ok to type the cost formula directly into the cells, although you will not receive credit if the variable rate and fixed costs are not calculated using cell references and formulas. H CD EFG 29 3 Edwards and Shav expect to sell 6,500 units in October. Prepare an absorption income statement for October (assume 30 we produce and sell the same number of units). 31 32 Sales in Units 6,500 33 34 Sales Revenue 35 36 37 39 40 41 42 43 44 65 4) Prepare a Contribution Margin Income Statement based on the October sales of 6.500 units (assume ve produce and sell the same number of units.) Do not combine expenses but show each expense separately in the appropriate a category. 0 1 Sales in Units 6,500 2 53 Sales Revenue 54 55 56 57 58 59 60 61 62 63 64 65 Operating Income 67 68 5) Calculate the contribution margin per unit. Calculate the variable cost ratio
