Question
Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10] Morrisey & Brown, Ltd., of Sydney is a merchandising company that is
Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10] 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. Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 ok July August September Sales in units Sales 9,000 $945,000 9,500 $997,500 10,000 $1,050,000 Cost of goods sold 567,000 598,500 630,000 Gross margin 378,000 399,000 420,000 Selling and administrative expenses: Advertising expense 30,000 30,800 30,800 Shipping expense 130,000 ences 136,000 142,000 Salaries and commissions 165,000 173,000 181,000 Insurance expense 10,950 10,950. 10,950 Depreciation expense. 17,300 17,300 17,300 Total selling and administrative expenses 354,050 368,050 Net operating income $ 23,950 $ 30,950 $ 382,050 37,950 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 10,000-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 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. Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Classification Required 2 >
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