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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
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 7,250 $ 797,500 478,500 319,000 September 7,750 $ 852,500 511,500 341,000 Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 6,750 Sales $ 742,500 Cost of goods sold 445,500 Gross margin 297,000 Selling and administrative expenses: Advertising expense 33,800 Shipping expense 69,500 Salaries and commissions 125,000 Insurance expense 9,900 Depreciation expense 22,100 Total selling and administrative expenses 260,300 Net operating income $ 36,700 33,800 73,700 132,100 9,900 22,100 271,600 $ 47, 400 33,800 77,900 139,200 9,900 22,100 282,900 $ 58,100 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 7,750-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 7,750-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Variable expenses: Fixed expenses: $ Required 2 Required 3 >
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