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The Valley Company is a merchandising firm that sells a single product. The company's revenues and expenses for the last three months are presented below:
The Valley Company is a merchandising firm that sells a single product. The company's revenues and expenses for the last three months are presented below: VALLEY COMPANY Comparative Income Statement for the Second Quarter
April | May | June | |
Sales in units | 5,000 | 6,000 | 7,320 |
Sales revenue | $700,000 | $840,00 | $1,024,800 |
Less: cost of goods sold | 280 ,000 | 336,000 | 409,920 |
Gross margin | 420,000 | 504,000 | 614,880 |
Less: operating expenses | |||
Shipping expense | 60,000 | 70,000 | 80,000 |
Advertising expense | 80,000 | 70,000 80,000 | 80,000 |
Salaries and commissions | 250,000 | 200,00 | 280,000 |
Insurance expense | 9,000 | 9,000 | 9,000 |
Depreciation expense | 42,000 | 42,000 | 42,000 |
Total operating expenses | 441,000 | 401,000 | 491,000 |
Net income (loss) | $(21,000) | $103,000 | $123,880 |
Required: a. Determine which expenses are mixed and, by use of the high-low method, separate each mixed expense into its variable and fixed components. State the cost formula for each mixed expense. b. Compute the company's total contribution margin for May.
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