Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 11 Aug 2017 My Price 14.00

Alden Company

Alden Company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas:

 

Cost Cost Formula
Cost of goods sold $26 per unit sold
Advertising expense $176,000 per quarter
Sales commissions 8% of sales
Administrative salaries $86,000 per quarter
Shipping expense ?
Depreciation expense $56,000 per quarter

 

Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters are given below:

 

Quarter Units Sold Shipping
Expense
Year 1:    
First 22,000 $166,000
Second 24,000 $181,000
Third 29,000 $223,000
Fourth 25,000 $186,000
Year 2:    
First 23,000 $176,000
Second 26,000 $191,000
Third 34,000 $238,000
Fourth 31,000 $214,000

 

Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.

 

Required:
1.

Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quarters above. (Omit the "$" sign in your response.)

 

Y = $ + $ X

 

2.

In the first quarter of Year 3, the company plans to sell 27,000 units at a selling price of $56 per unit. Prepare a contribution format income statement for the quarter. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

 

Alden Company
Budgeted Income Statement
For the First Quarter of Year 3
(Click to select) Sales Advertising expense Sales commissions Depreciation expense Shipping expense Cost of goods sold   $
Variable expenses:    
(Click to select) Cost of goods sold Depreciation expense Sales commissions Advertising expense Administrative salaries Shipping expense $  
(Click to select) Sales commissions Administrative salaries Advertising expense Depreciation expense Cost of goods sold Shipping expense    
(Click to select) Depreciation expense Shipping expense Advertising expense Administrative salaries Cost of goods sold Sales commissions    
 
 
Total variable expenses    
   
(Click to select) Gross Margin Contribution margin Net operating loss Net operating income    
Fixed expenses:    
(Click to select) Depreciation expense Administrative salaries Advertising expense Cost of goods sold Shipping expense Sales commissions    
(Click to select) Sales commissions Shipping expense Depreciation expense Administrative salaries Advertising expense Cost of goods sold    
(Click to select) Cost of goods sold Advertising expense Administrative salaries Shipping expense Depreciation expense Sales commissions    
(Click to select) Sales commissions Cost of goods sold Shipping expense Advertising expense Administrative salaries Depreciation expense    
 
 
Total fixed expenses    
   
(Click to select) Contribution margin Net operating income Gross Margin Net operating loss   $

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Answers

Maurice Tutor
(5)
Status NEW Posted 11 Aug 2017 05:08 PM My Price 14.00

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