Problem 5A-7 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: August 8,000 $760,000 456,000 304,000 September 8,500 $ 807,500 484,500 323,000 Morrisey & Brown, Ltd. Income statements For the Three Months Ended September 30 July Sales in units 7,500 Sales $ 712,500 Cost of goods sold 427,500 Gross margin 285,000 selling and administrative expenses: Advertising expense 39,600 Shipping expense 81,000 Salaries and commissions 135,000 Insurance expense 6,100 Depreciation expense 19,300 Total selling and administrative expenses 281,000 Net operating income $ 4,000 39,600 85,800 142,400 6,100 19,300 293,200 10,800 39,600 90,600 149,800 6,100 19,30 305,400 $ 17,600 $ 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 8,500-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 Variable Fixed IMixed Mixed Fixed Fixed Required 1 Required 2 > 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 8,500-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 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. (Round the Variable cost per unit to 1 decimal place.) Variable Cost Fixed Cost Formula $ 9.6 per unit $ 25,600 Y = + X Shipping expense Salaries and commissions expense $ 14.8 per unit $ 75,800 Y = + X 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 8,500-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 Redo the company's income statement at the 8,500-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Sales Variable expenses Cost of goods sold Shipping expense Salaries and commissions expense 0 0 Fixed expenses: Advertising expense Shipping expense Salaries and commissions expense Insurance expense Depreciation expense 0 Net operating income $ 0
