PROBLEM 3-16 High-Low Method; Contribution Format Income Statement [LO3, LO4] 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 Advertising expense Sales commissions $35 per unit sold $210,000 per quarter 6% of sales Shipping expense. Administrative salaries ? $145,000 per quarter $9,000 per quarter $76,000 per quarter Insurance expense Depreciation expense. 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: Shipping Expense Quarter Units Sold Year 1: First $119,000 $175,000 $190,000 $164,000 10,000 Second 16,000 Third 18,000 Fourth 15,000 Year 2: First 11,000 17,000 $130,000 $185,000 $210,000 $147,000 Second Third 20,000 Fourth 13,000 Milden Company's president 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. 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. 2.

Q: a prod

A: Standard costs are the anticipated costs of manufacturing the product. Standard Direct Materials…

Q: The definition of the cost is the collection of cost data in some organized way by means of an…

A: Cost is amount of cost incurred

Q: Distinguish between Period cost and Product cost? Give two examples of each cos

A: Classification of costs on the basis of functions:- 1. Product Cost 2. Period Cost

Q: Discuss the merits and demerits of the cost volume profit analysis (CVP)

A: Cost volume profit analysis is one of the important concept used in cost accounting. Under this…

Q: Compare variable and fixed expenses.

A: Variable expenses are the expenses which change proportionately with a change in the activity…

Q: Define the term transportation costs.

A: Cost: Cost is that amount which is paid to get something from the any supplier and the amount which…

Q: Describe cost depletion and percentage depletion. Whyis the percentage depletion method permitted?

A: Depletion: Depletion is defined as the reduction in the value of natural resources due to its…

Q: Define restructuing costs.

A: Income statement: The financial statement which reports revenues and expenses from business…

Q: Define each of the following terms:d. Flotation cost, F

A: Primary market is the place where company sells or offers new equity shares to the investors. New…

Q: Research and development costs are classified as: O a. Inventoriable costs. O b. O c. O d. Product…

A: A cost accounting system is a system of accounting that is helpful for the internal management to…

Q: d.    Perpetual system, LIFO cost flow. e.    Periodic system, weighted-average cost flow. f.…

A: Perpetual inventory system - Movement of inventory is recorded on regular basis. Periodic inventory…

Q: The high-low method used in determining costs can be used to estimate the cost queation using just…

A:

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.