2) The Central Valley Company is a merchandising firm that sells a single product. The company's...

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Accounting

2) The Central Valley Company is a merchandising firm that sellsa single product. The company's revenues and expenses for the lastthree months are given below:
Central Valley Company
Comparative Income Statement
For the Second Quarter
April
May
June
Sales in units
4,500
5,250
6,000
Sales Revenue
$630,000
$735,000
$840,000
Less cost of goods sold
252,000
294,000
336,000
Gross Margin
$378,000
$441,000
$504,000
Less operating expense
Shipping expense
56,000
63,500
71,000
Advertising expense
70,000
70,000
70,000
Salary & Commissions
143,000
161,750
180,500
Insurance expense
9,000
9,000
9,000
Depreciation expense
42,000
42,000
42,000
Total expense
$320,000
$346,250
$372,500
Net Income
$58,000
$94,750
$131,500
Required:
a. Determine which expenses are mixed and, by use of thehigh-low method, separate each mixed expense into its variable andfixed components. State the cost formula for each mixedexpense.
b. Compute the company's total contribution margin for May.

Answer & Explanation Solved by verified expert

3.8 Ratings (722 Votes)

a There are two mixed expenses Shipping expense and salaries and commission expenses Shipping expense Variable expense per unit Change in costsChange in units See Answer

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	Central Valley Company Comparative Income Statement For the Second Quarter


	April	May	June
Sales in units	4,500	5,250	6,000
Sales Revenue	$630,000	$735,000	$840,000
Less cost of goods sold	252,000	294,000	336,000
Gross Margin	$378,000	$441,000	$504,000
Less operating expense
Shipping expense	56,000	63,500	71,000
Advertising expense	70,000	70,000	70,000
Salary & Commissions	143,000	161,750	180,500
Insurance expense	9,000	9,000	9,000
Depreciation expense	42,000	42,000	42,000
Total expense	$320,000	$346,250	$372,500
Net Income	$58,000	$94,750	$131,500