Smith & Chief Ltd. of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the four most recent quarters follow: Sales in units Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses: For the Four Quarters Ending December 31 Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total operating expenses Net income SMITH & CHIEF LTD. Income Statements Advertising expense Shipping expense Salaries and commissions expense Quarter 1 Quarter 2 Quarter 3 Quarter 4 6,100 5,600 6,920 6,300 A$630,000 378,000 252,000 Advertising expense A$610,000 A$560,000 366,000 336,000 244,000 224,000 17 22,600 40,400 22,600 42,400 81,200 7,600 (Note: Smith & Chief Ltd.'s Australian-formatted income statement has been recast into the format common in Canada. The Australian dollar is denoted by A$.) A$ AS AS 22,600 47,680 87,600 97,840 7,600 7,600 16,600 16,600 16,600 174,800 170,400 191,520 A$ 69,200 A$ 53,600 A$ 85,280 A$ 68,840 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements. A$692,000 415,200 276,800 Variable Cost Y= A$ Y= A$ Y= A$ per unit per unit per unit DE A$ A$ A$ 22,600 42,080 94,280 7,600 16,600 183,160 22,600 A$ AS +A$ Fixed Cost 2-b. Using the high-low method, state the cost formula for each mixed expense. 22,600 XXX
Smith & Chief Ltd. of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the four most recent quarters follow: Sales in units Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses: For the Four Quarters Ending December 31 Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total operating expenses Net income SMITH & CHIEF LTD. Income Statements Advertising expense Shipping expense Salaries and commissions expense Quarter 1 Quarter 2 Quarter 3 Quarter 4 6,100 5,600 6,920 6,300 A$630,000 378,000 252,000 Advertising expense A$610,000 A$560,000 366,000 336,000 244,000 224,000 17 22,600 40,400 22,600 42,400 81,200 7,600 (Note: Smith & Chief Ltd.'s Australian-formatted income statement has been recast into the format common in Canada. The Australian dollar is denoted by A$.) A$ AS AS 22,600 47,680 87,600 97,840 7,600 7,600 16,600 16,600 16,600 174,800 170,400 191,520 A$ 69,200 A$ 53,600 A$ 85,280 A$ 68,840 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements. A$692,000 415,200 276,800 Variable Cost Y= A$ Y= A$ Y= A$ per unit per unit per unit DE A$ A$ A$ 22,600 42,080 94,280 7,600 16,600 183,160 22,600 A$ AS +A$ Fixed Cost 2-b. Using the high-low method, state the cost formula for each mixed expense. 22,600 XXX
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Smith & Chief Ltd. of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity
among Australian consumers. The company's income statements for the four most recent quarters follow.
SMITH & CHIEF LTD.
Income Statements
For the Four Quarters Ending December 31
Quarter 1 Quarter 2
6,100
5.600
A$610,000 A$560,080 A$692,000
366,000 336,000
415,280
244,800 224,800
276,800
Sales in units
Sales revenue
Less: Cost of goods sold
Gross margin
Less: Operating expenses:
Advertising expense
Shipping expense
Salaries and commissions
Insurance expense
Depreciation expense
Total operating expenses
Net income
Advertising expense
Shipping expense
Salaries and commissions expense
(Note: Smith & Chief Ltd.'s Australian-formatted income statement has been recast into the format common in Canada. The Australian
dollar is denoted by A$.)
S
Advertising expense
22,600
22,600
22,600
40,408
42.400
42,080
87,600
81,200
97,840
94,288
7,500
7,600
7,600
7,600
16,600
16,600
16,600
16,600
174,800 170,480
191,520
183,160
A$ 69,200 A$ 53,600 A$ 85,280 A$ 68,840
AS
AS
2-a. Using the high-low method, separate each mixed expense into variable and fixed elements.
1994
Vartable Cost
Quarter 3
6,920
C
MEAS
Y=AS
Y= A$
22,600
47,680
per unit
per unit
per unit
Quarter 4
6,300
A$630,000
378,000
252,000
AS
AS
45
Caleanke
22,600 AS
AS
+AS
2-b. Using the high-low method, state the cost formula for each mixed expense.
Fixed Cost
22,600
XXX
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