Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10] Morrisey & Brown, Limited, is the sole distributor of a product with growing sales. Its income statements for the three most recent months follow: Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 July Sales in units Sales Cost of goods sold Gross margin Selling and administrative expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling and administrative expenses Net operating income 4,750 $546,250 327,750 218,500 31,800 35,500 81,000 6,550 18,000 172,850 $ 45,650 August 5,250 $ 603,750 362,250 241,500 31,800 38,100 87,300 6,550 18,000 181,750 $ 59,750 September 5,750 $ 661,250 396,750 264,500 31,800 40,700 93,600 6,550 18,000 190,650 $ 73,850 Required: 1. By analyzing data from the company's income statements, classify each of its 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. Express the variable and fixed portions of each mixed expense in the form Y = a +bX. 3. Redo the company's income statement at the 5,750-unit level of activity using the contribution format.
Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10] Morrisey & Brown, Limited, is the sole distributor of a product with growing sales. Its income statements for the three most recent months follow: Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 July Sales in units Sales Cost of goods sold Gross margin Selling and administrative expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling and administrative expenses Net operating income 4,750 $546,250 327,750 218,500 31,800 35,500 81,000 6,550 18,000 172,850 $ 45,650 August 5,250 $ 603,750 362,250 241,500 31,800 38,100 87,300 6,550 18,000 181,750 $ 59,750 September 5,750 $ 661,250 396,750 264,500 31,800 40,700 93,600 6,550 18,000 190,650 $ 73,850 Required: 1. By analyzing data from the company's income statements, classify each of its 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. Express the variable and fixed portions of each mixed expense in the form Y = a +bX. 3. Redo the company's income statement at the 5,750-unit level of activity using the contribution format.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10]
Morrisey & Brown, Limited, is the sole distributor of a product with growing sales. Its income statements for the three most recent
months follow:
Morrisey & Brown, Limited
Income Statements
For the Three Months Ended September 30
July
Sales in units
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses:
Advertising expense
Shipping expense
Salaries and commissions
Insurance expense
Depreciation expense
Total selling and administrative expenses
Net operating income
4,750
$ 546,250
327,750
218,500
31,800
35,500
81,000
6,550
18,000
172,850
$ 45,650
August
5,250
$603,750
362,250
241,500
31,800
38,100
87,300
6,550
18,000
181,750
$ 59,750
September
5,750
$ 661,250
396,750
264,500
31,800
40,700
93,600
6,550
18,000
190,650
$ 73,850
Required:
1. By analyzing data from the company's income statements, classify each of its expenses (including cost of goods sold) as either
variable, fixed, or mixed.
Complete this question by entering your answers in the tabs below.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions
of each mixed expense in the form Y = a + bxX.
3. Redo the company's income statement at the 5,750-unit level of activity using the contribution format.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb16b6c11-26e2-40d2-a820-fcc5d6bdcd13%2F6bb3e1c5-ccd6-419f-bc30-d4d8b2545bb2%2Ft2nypi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 5A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5-10]
Morrisey & Brown, Limited, is the sole distributor of a product with growing sales. Its income statements for the three most recent
months follow:
Morrisey & Brown, Limited
Income Statements
For the Three Months Ended September 30
July
Sales in units
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses:
Advertising expense
Shipping expense
Salaries and commissions
Insurance expense
Depreciation expense
Total selling and administrative expenses
Net operating income
4,750
$ 546,250
327,750
218,500
31,800
35,500
81,000
6,550
18,000
172,850
$ 45,650
August
5,250
$603,750
362,250
241,500
31,800
38,100
87,300
6,550
18,000
181,750
$ 59,750
September
5,750
$ 661,250
396,750
264,500
31,800
40,700
93,600
6,550
18,000
190,650
$ 73,850
Required:
1. By analyzing data from the company's income statements, classify each of its expenses (including cost of goods sold) as either
variable, fixed, or mixed.
Complete this question by entering your answers in the tabs below.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions
of each mixed expense in the form Y = a + bxX.
3. Redo the company's income statement at the 5,750-unit level of activity using the contribution format.
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