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 Morrisey & Brown, itd. Income Statements For the three months Ended September 30 July Autust September Sales in units 7.000 7,500 8,000 Sales $ 735,000 $ 787,500 $ 140,000 Cost of goods sold 441.000 472,500 504,000 Gross margin 294,000 315,000 336,000 Selling and administrative expenses Advertising expense 16.000 36,400 36.ee Shipping expense 75.000 79,400 83,800 Salaries and commissions 120,000 127,200 134,400 Insurance expense 8,400 8.400 8,400 Depreciation expense 22,800 22,800 22,800 Total selling and administrative expenses 262.600 274,200 285,00 Het operating income $ 31,400 $ 40,800 $50,200 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 8,000-unit level of activity using the contribution format 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 = -bX 3. Redo the company's income statement at the 8,000-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 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 Ya+bx (Round the Variable cost per unit to 1 decimal place.) Variable Cost Fixed Cost Formula Shipping expense per un X Salaries and commissions expense per unit X Required 1 Required 2 Required 3 Redo the company's income statement at the 8,000-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Variable expenses: Cost of goods sold Shipping expense Salaries and commissions expense 0 0 Fixed expenses
