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: September 8,750 August 8,250 $ 825,000 495,000 330,000 $ 875,000 525,000 350,000 Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 7,750 Sales $ 775,000 Cost of goods sold 465,000 Gross margin 310,000 Selling and administrative expenses: Advertising expense 28, 200 Shipping expense 89,500 Salaries and commissions 140,000 Insurance expense 7,200 Depreciation expense 21,600 Total selling and administrative expenses 286,500 Net operating income $ 23,500 28, 200 94,500 147,500 7,200 21,600 299,000 $ 31,000 28,200 99,500 155,000 7,200 21,600 311,500 $ 38,500 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 8,750-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.) Fixed Cost Formula Variable Cost per unit Shipping expense Salaries and commissions expense per unit A A :A X Required: 1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of go variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable of each mixed expense in the form Y = a + bx. 3. Redo the company's income statement at the 8,750-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 8,750-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Variable expenses: Fixed expenses 0
