80.2K

Verified Solution

Link Copied!

Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow: Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 5,000 Sales $ 625,000 Cost of goods sold 375,000 Gross margin 250,000 Selling and administrative expenses Advertising expense 22,800 Shipping expense 46,000 Salaries and commissions 92,000 Insurance expense 6,050 Depreciation expense 24,700 Total selling and administrative expenses 191,550 Net operating income $ 58,450 August 5,500 $ 687,500 412,500 275,000 September 6,000 $750,000 450,000 300,000 22,800 48,800 98,400 6,050 24,700 200, 750 $ 74,250 22,800 51,600 104,800 6,050 24,700 209,950 $ 90,050 Required: 1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bx. 3. Redo the company's income statement at the 6,000-unit level of activity using the contribution format

Answer & Explanation Solved by verified expert

See Answer