You will use Excel for this case. All non-input cells will either reference another cell or a calculated (formula) cell. Format all

the cells as accounting. Any variable cost elements that you discover should be displayed to four decimal places. The

purpose of this case is to reinforce the concept of cost behavior, and to give you some Excel experience. Remember that

readability and neatness does count when you create your solution.

Data regarding the Pochettino Company's operations and selling expenses for five months have been accumulated in order

develop a budget estimate for an upcoming month. The Marketing Department has reviewed this data and could not reach a

conclusion as to what is the most appropriate independent variable for predicting variable and mixed costs. These costs may

be dependent on sales dollars, shipping weight, or distance shipped.

Data Set for the Pochettino Company case
		April	May	June	July	August
Distance Shipped (miles)		425,000	420,000	450,000	375,000	550,000
Weight Shipped (pounds)		65,000	25,000	70,000	72,000	85,000
Dollar Sales		$ 4,200,000	$ 3,900,000	$ 4,500,000	$ 5,000,000	$ 8,400,000
Cost of Goods		2,520,000	2,340,000	2,700,000	3,000,000	5,040,000
Gross Margin		1,680,000	1,560,000	1,800,000	2,000,000	3,360,000
Costs
Advertising		204,000	198,000	210,000	220,000	288,000
Commissions		126,000	117,000	135,000	150,000	252,000
Salaries		80,000	80,000	80,000	80,000	80,000
Supplies		21,700	20,500	24,500	19,700	27,000
Shipping costs		87,500	60,000	93,000	95,200	109,500
NOI		$ 1,160,800	$ 1,084,500	$ 1,257,500	$ 1,435,100	$ 2,603,500

REQUIRED:

A. Use Excel to review the data in the chart above. Specifically, you need to determine which of the costs Advertising,

Commissions, Salaries, Supplies, and Shipping Costs are purely variable, purely fixed, and which are mixed. You also need to

determine what is the cost driver for those costs that are variable and/or mixed.

Show how you determined the nature of the costs.

B. Develop a cost formula for each cost/expense item.

C. Pochettino Company wants to develop a budget for selling expenses for October 2017 when the following estimates

are to be applicable: dollar sales - $5,500,000; weight shipped- 75,000 pounds; distance shipped - 570,000 miles.

Prepare a traditional Income Statement for October 2017 which has the following:

1. Cost/Expense Item

2. Type of cost for each cost item--variable (V), fixed (F), mixed (M).

3. Variable cost component, if any, for each cost item.

4. Fixed cost component, if any, for each cost item.

5.October 2017 estimate for each cost item.