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PROBLEM 2-16 Cost Behavior; High-Low Method; Contribution Format Income Statement [LO2-4, LO2-5, LO2-6] 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 state- ments for the three most recent months follow: Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July August Sales in units ........... 4,000 4,500 Sales .............. $400,000 $450,000 Cost of goods sold ....... 240,000 270,000 Gross margin ............ 160,000 180,000 Selling and administrative expenses: Advertising expense .... 21,000 21,000 Shipping expense ............. 34,000 36,000 Salaries and commissions ...... 78,000 84,000 Insurance expense ...... 6,000 6,000 Depreciation expense ... 15,000 15,000 Total selling and administrative expenses 154,000 162,000 September 5,000 $500,000 300,000 200,000 21,000 38,000 90,000 6,000 15,000 170,000
PROBLEM 2-16 Cost Behavior; High-Low Method; Contribution Format Income Statement [LO2-4, LO2-5, LO2-6] 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 state- ments for the three most recent months follow: Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July August Sales in units ........... 4,000 4,500 Sales .............. $400,000 $450,000 Cost of goods sold ....... 240,000 270,000 Gross margin ............ 160,000 180,000 Selling and administrative expenses: Advertising expense .... 21,000 21,000 Shipping expense ............. 34,000 36,000 Salaries and commissions ...... 78,000 84,000 Insurance expense ...... 6,000 6,000 Depreciation expense ... 15,000 15,000 Total selling and administrative expenses 154,000 162,000 September 5,000 $500,000 300,000 200,000 21,000 38,000 90,000 6,000 15,000 170,000
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15 Oct 2021
Bunny GreenfelderLv2
3 May 2018
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Related questions
| Data P2Part II-1: | ||||||
| Morrisey & Brown is amerchandising company that is the sole distributor of aproduct | ||||||
| that is increasing inpopularity among consumers. The company's income statements | ||||||
| for the three most recentmonths follow: | ||||||
| MORRISEY & BROWN,LTD. | ||||||
| Income Statements | ||||||
| For the Three Months EndedSeptember 30 | ||||||
| July | August | Sept | ||||
| Sales in units | 4,000 | 4,500 | 5,000 | |||
| Sales revenue | $400,000 | $450,000 | $500,000 | |||
| Less cost of goods sold | 240,000 | 270,000 | 300,000 | |||
| Gross margin | 160,000 | 180,000 | 200,000 | |||
| Less operating expenses: | ||||||
| Advertising expense | 21,000 | 21,000 | 21,000 | |||
| Shipping expense | 34,000 | 36,000 | 38,000 | |||
| Salaries and commissions | 78,000 | 84,000 | 90,000 | |||
| Insurance expense | 6,000 | 6,000 | 6,000 | |||
| Depreciation expense | 15,000 | 15,000 | 15,000 | |||
| Total operating expenses | 154,000 | 162,000 | 170,000 | |||
| Net operating income (loss) | $6,000 | $18,000 | $30,000 | |||
| Required: | ||||||
| 1. Identify each of thecompany's expenses (including cost of goods sold) as eithervariable, fixed, or mixed. | ||||||
| 2. Using the high-low method,separate each mixed expense into variable and fixed elements. | ||||||
| 3. Redo the company's incomestatement at the 5,000 unit-level of activity using thecontribution margin | ||||||
| format. | ||||||
