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Identify each of the company's expenses (including cost of goods sold) as either variable, fixed, or mixed

Identify each of the company's expenses (including cost of goods sold) as either variable, fixed, or mixed

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABD Limited is a merchandising company that is the sole distributor of a product that is increasing in popularity among consumers. The company's income statements for the three most recent months follow: Sales in units 4,000 4,500 5,000 Sales revenue 20,000,000 22,500,000 25,000,000 Cost of goods sold 12,000,000 13,500,000 15,000,000 Gross profit 8,000,000 9,000,000 10,000,000 Selling and administrative expenses: Advertising expense 1,050,000 1,050,000 1,050,000 Shipping expense 1,700,000 1,800,000 1,900,000 Salaries and commissions 3,900,000 4,200,000 4,500,000 Insurance expense 300,000 300,000 300,000 Depreciation expense 750,000 750,000 750,000 Total selling and administrative expenses 7,700,000 8,100,000 8,500,000 Net operating income 300,000 900,000 1,500,000 Required: 1 Identify each of the company's 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. Redo the company's income statement at the 5,000-unit level of activity using the 3 contribution margin format
Transcribed Image Text:ABD Limited is a merchandising company that is the sole distributor of a product that is increasing in popularity among consumers. The company's income statements for the three most recent months follow: Sales in units 4,000 4,500 5,000 Sales revenue 20,000,000 22,500,000 25,000,000 Cost of goods sold 12,000,000 13,500,000 15,000,000 Gross profit 8,000,000 9,000,000 10,000,000 Selling and administrative expenses: Advertising expense 1,050,000 1,050,000 1,050,000 Shipping expense 1,700,000 1,800,000 1,900,000 Salaries and commissions 3,900,000 4,200,000 4,500,000 Insurance expense 300,000 300,000 300,000 Depreciation expense 750,000 750,000 750,000 Total selling and administrative expenses 7,700,000 8,100,000 8,500,000 Net operating income 300,000 900,000 1,500,000 Required: 1 Identify each of the company's 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. Redo the company's income statement at the 5,000-unit level of activity using the 3 contribution margin format
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