Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / QUESTION ONE Coleman Ltd is a merchandising firm that is the sole distributor of the products that are increasing in popularity among Irish consumers
QUESTION ONE Coleman Ltd is a merchandising firm that is the sole distributor of the products that are increasing in popularity among Irish consumers. The company's profit statements for the three most recent months follow Muly 4,000 400.00 C240,000 160,000 August 4,500 €450,000 September 5.000 ES00,000 300,000 200,000 C270,000 C180.000 Sales in Units Sales Revenue Less Cost of Goods Sold Gross Margin Less Operating Expenses Advertising Shipping Salaries Insurance Depreciation Total Operating Expenses Net Income €21.000 €34.000 €78.000 05.000 €15.000 €154.000 €6,000 (71.000 C36.000 C4.000 06.000 ( 5 ) 6162,000 €18,000 02.1.000 638,000 €90,000 16,000 €15,000 €170.000 630,000 Coleman lad's three products have the following detai: Prot ke Direct material Espere) Contribution per unit Cretributive per kg of Product Skg 25 Product kg 548 8 437 1.000 5,000 EZ,000 Demand Exchange al contra The company must produce 1.000 units of product for a special contract before meeting normal demand REQUIRED: al Identity each of Coleman Lhof's expers as being variable, fixed or mied in relation to changes in the level of activity (10 Marks bi Utilising the high low method, separate each mbed experse into variable and feed elements and determine the cost formule for each mixed expense 115 Marks Page 2 of 6
a.
| Expense | Cost Behaviour |
| Cost of Goods Sold | Variable |
| Advertising | Fixed |
| Shipping | Mixed |
| Salaries | Mixed |
| Insurance | Fixed |
| Depreciation | Fixed |
b. Separation of shipping expenses:
| High | Low | Change | |
| Expenses | $ 38,000 | $ 34,000 | $ 4,000 |
| Activity Level | 5,000 units | 4,000 units | 1,000 units |
Variable shipping expense per unit = $ 4,000 / 1,000 units = $ 4 per unit
Fixed cost per month = $ ( 38,000 - 5,000 x 4 ) = $ 18,000
Cost formula for shipping expense :
Y = 4 x + 18,000
Separation of salaries expense:
| High | Low | Change | |
| Expenses | $ 90,000 | $ 78,000 | $ 12,000 |
| Activity Level | 5,000 units | 4,000 units | 1,000 units |
Variable salaries expense per unit = $ 12,000 / 1,000 units = $ 12 per unit
Fixed salaries expense per month = $ ( 90,000 - 5,000 x 12 ) = $ 30,000
Cost formula for salaries expense:
Y = 12 x + 30,000
