Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Sales Variable expenses: 500,000 Cost of goods sold 300,000 Salaries and commissions expense Shipping expense 300,000 Contribution margin Fixed expenses: Advertising expense 21,000 Depreciation expense 15,000 Insurance expense 6,000 Salaries and commissions expense Shipping expense 42,000 Net operating income 30,000 %24

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 statements for the three most recent months follow:


 

Morrisey & Brown, Ltd.
Income Statements
For the Three Months Ended September 30
    July       August     September
  Sales in units   4,000         4,500       5,000  
                   
  Sales   $400,000           $450,000       $500,000  
  Cost of goods sold  

240,000  

      270,000       300,000  
                   
  Gross margin   160,000         180,000       200,000  
                   
  Selling and administrative 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 selling and administrative expenses   154,000         162,000       170,000  
                   
  Net operating income   $  6,000         $  18,000       $  30,000  
                   
 

Redo the company’s income statement at the 5,000-unit level of activity using the contribution format.

  

Morrisey & Brown, Ltd.
Income Statement
For the Month Ended September 30
Sales
Variable expenses:
500,000
Cost of goods sold
300,000
Salaries and commissions expense
Shipping expense
300,000
Contribution margin
Fixed expenses:
Advertising expense
21,000
Depreciation expense
15,000
Insurance expense
6,000
Salaries and commissions expense
Shipping expense
42,000
Net operating income
30,000
%24
Transcribed Image Text:Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Sales Variable expenses: 500,000 Cost of goods sold 300,000 Salaries and commissions expense Shipping expense 300,000 Contribution margin Fixed expenses: Advertising expense 21,000 Depreciation expense 15,000 Insurance expense 6,000 Salaries and commissions expense Shipping expense 42,000 Net operating income 30,000 %24
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