Cost Cost Formula $35 per unit sold Cost of good sold.... Advertising expense. Sales commissions. Shipping expense. Administrative salaries.. Insurance expense.... Depreciation expense $210,000 per quarter 6% of sales $145,000 per quarter $9,000 per quarter $76,000 per quarter Shipping Expense Units Quarter Sold Year 1: 10,000 $119,000 16,000 $175,000 18,000 $190,000 15,000 $164,000 First . Second Third .... Fourth Year 2: First.. Second 11,000 $130,000 17,000 $185,000 20,000 $210,000 13,000 $147,000 Third Fourth
High-Low Method; Contribution Format Income Statement
Milden Company is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas:
Because shipping expense is a mixed cost, the company needs to estimate the variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data:
Required:
1. Using the high-low method, estimate a cost formula for shipping expense in the form Y = a + bX.
2. In the first quarter of Year 3, the company plans to sell 12,000 units at a selling price of $ 100 per unit. Prepare a contribution format income statement for the quarter.
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