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Homework answers / question archive / MI!den Company Is a distributor who wants to start using a contribution format income statement for planning purposes
MI!den Company Is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas:
Cost Cost of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense
Cost Formula $20 per unit sold $170,000 per quarter 5% of sales $80,000 per quarter $9,000 per quarter $50,000 per quarter
Because shipping expense is a mixed cost, the company needs to estimate the variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data:
Quarter Units Sold Shipping Expense Year 1: First 16,000 $ 160,000 Second 18,000 $ 175,000 Third 23,000 $ 217,800 Fourth 19,000 $ 180,000 Year 2: First 17,000 $ 170,000 Second 20,000 $ 185,000 Third 25,000 $ 232,000 Fourth 22,000 $ 208,000
Required: 1. Using the high-low method, estimate a cost formula for shipping expense In the form Y = a + bX. 2.
REQUIREMNT
In the first quarter of Year 3. the company plans to sell 21.000 units at a selling price of $50 per unit Prepare a contribution format income statement for the quarter.
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