60.1K

Verified Solution

Link Copied!

Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The companys revenues and expenses (in British pounds) for the last three months are given below: Frankel Ltd. Comparative Income Statements For the Three Months Ended June 30 April May June Sales in units 2,000 3,300 4,950 Sales revenue 350,000 577,500 866,250 Cost of goods sold 138,000 227,700 341,550 Gross margin 212,000 349,800 524,700 Selling and administrative expenses: Shipping expense 42,100 56,400 74,550 Advertising expense 70,300 70,300 70,300 Salaries and commissions 113,900 164,600 228,950 Insurance expense 9,300 9,300 9,300 Depreciation expense 42,500 42,500 42,500 Total selling and administrative expenses 278,100 343,100 425,600 Net operating income (loss) (66,100) 6,700 99,100 (Note: Frankel Ltd.s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by .) Required: 1. Identify each of the companys expenses (including cost of goods sold) as either variable, fixed, or mixed. Expenses Classification Cost of goods sold Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation expense 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. (Enter mixed expenses in the order of company expenses provided under question.) Variable Cost Fixed Cost Formula per unit Y = + X per unit Y = + X 3. Redo the companys income statement at the 4,950-unit level of activity using the contribution format. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Frankel Ltd. Income Statement For the Month Ended June 30 Variable expenses: Contribution margin Fixed expenses: ReferenceseBook & Resources

Answer & Explanation Solved by verified expert

See Answer