2. In the first quarter of Year 3, the company plans to sell 41,000 units at a selling price of $59 per unit. Prepare a contribution format income statement for the quarter. (Do not round your intermediate calculations.) Milden Company Budgeted Contribution Format Income Statement For the First Quarter, Year 3 Variable expenses: Total variable expenses Fixed expenses: Total fixed expenses
Milden Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning, the company has decided to start using a contribution format income statement. To have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas:
| Cost | Cost Formula | |
| Cost of good sold | $30 per unit sold | |
| Advertising expense | $186,000 per quarter | |
| Sales commissions | 8% of sales | |
| Shipping expense | ? | |
| Administrative salaries | $96,000 per quarter | |
| Insurance expense | $10,600 per quarter | |
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$66,000 per quarter | |
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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 follow:
| Quarter | Units Sold | Shipping Expense |
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| Year 1: | ||||
| First | 32,000 | $ | 176,000 | |
| Second | 34,000 | $ | 191,000 | |
| Third | 39,000 | $ | 233,000 | |
| Fourth | 35,000 | $ | 196,000 | |
| Year 2: | ||||
| First | 33,000 | $ | 186,000 | |
| Second | 36,000 | $ | 201,000 | |
| Third | 46,400 | $ | 248,000 | |
| Fourth | 43,400 | $ | 224,000 | |
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Milden Company’s president would like a cost formula derived for shipping expense so that a
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