Problem 1

Haram Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $182.10 per unit.

Year 1 Year 2 Year 3

Sales volume (units) 60,000 80,000 110,000

Sales $2,100,000 $2,800,000 $3,850,000

Expenses:

Cost of Goods Sold (840,000) (1,120,000) (1,540,000)

Salaries (520,000) (680,000) (920,000)

Rent (50,000) ( 50,000) ( 50,000)

Commissions (70,560) (94,080) (129,860)

Administrative (504,800) (656,400) (883,800)

Net Operating Income $164,640 $199,520 $326,340

Required C: Break out each YEAR 3 cost item into its VARIABLE and FIXED cost amounts. All amounts must be shown in dollars and present in TOTAL AMOUNTS.

Using the High/Low Method provide all supporting calculations for all mixed cost amounts.

Total Variable Cost Fixed Cost

Cost of Sales (1,540,000)

Salaries (920,000)

Rent (50,000)

Commissions (129,860)

Administrative (883,800)

Requirement D: Prepare a Year 3 Traditional Income Statement. Label all items in proper order and show correct amounts to receive full credit.

Requirement E: Prepare a Year 3 Contribution Margin Income Statement. Label all items in proper order and show correct amounts to receive full credit.

Required F: Now Assume that Haram Corporation sells ZERO units in Year 3. Provide their Year 3 Net Income (Loss) amount.

Year 3 Net Income (Loss):