Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10]

Morrisey & Brown, Limited, 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, Limited Income Statements For the Three Months Ended September 30
	July	August	September
Sales in units	4,500	5,000	5,500
Sales	$ 495,000	$ 550,000	$ 605,000
Cost of goods sold	297,000	330,000	363,000
Gross margin	198,000	220,000	242,000
Selling and administrative expenses:
Advertising expense	30,600	30,600	30,600
Shipping expense	35,000	37,400	39,800
Salaries and commissions	80,000	86,200	92,400
Insurance expense	9,950	9,950	9,950
Depreciation expense	21,800	21,800	21,800
Total selling and administrative expenses	177,350	185,950	194,550
Net operating income	$ 20,650	$ 34,050	$ 47,450

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 companys income statement at the 5,500-unit level of activity using the contribution format.

. ur. 2 yuru ung the high-lowrethod, sparathrixed expens inlu varable and selleres. Espress the variable and fed portions cath mixed ei She form Yux (Round the variable cost per unit to 1 m pece) Variable Cast Trend Cont Famule perunt perunt Complete this question by entering your answers in the tabs below. Racial1 Rescu 2 Regina 3 Rece the company's income interents the 5,5oC-urit level of trity usre the contribution for at Morrisay & Brown, Limited Income Statement For the Month Ended Balmber 30 Vanalo capocos: II 0 FA $ 11 Required 2 Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10 Motsey Brown, Limited, of Sydnay is a merchandising camaany that is the sole distributor of a product that is increasing in gocu arity among Alstralian consumers. The company income statererts for the three most recent months follow: Maree State Merwey Deos, Diritud Por The Three Kanth Reded apter 30 July August Super SNAR Intte SDD .. 5,99 Bal. 495.000 $ 52,000 $ 605, 5 of good 192,00D 579,900 109.00 Uy 198.00 22.000 Sills and Traive HR: deve. Liviu Var 30.600 600 30,65 oping pence 35,000 11,400 39.88 Salai LTC CETIRES 10, DDD 15,200 92,400 Que wapungu 9.95 3,950 9,95 peoint Soe expense 21.800 2.900 21.BD Iat.. aclling si dinitiu 177.350 2:3,250 194,953 194 Het Ring Sreera 20.650 $ 11,050 $ 47,455 Required: 1. By znalyzing the data from the company's income statements, classy ezch is experses including cost of goods sold as eithe vaieble, fixed, or mixed. 2. Using the high-low method separate each mixed exparse into variable and Hxad elements. Express the variable and nxed portions af cach mixed expers in the form Y-abx. 3. Redote concerty's income statement at the 5.500-unit level of activity using the contebution format Complete this question by entering your answers in the tabs below. Kaca 1 Racun 2 Kasur 3 Pyaralyong the data from the company's incurre statements, assf each of its expenses (cluding best of goods sold') as ekler var oble, Fixer, er med Classification Expenses Dog of goods sod Tan 201 14 wi u. SHERI Salanes and to 306 Terance exponse Depan Potret Required 2 >