The following is data from the Coft Company which manufactures and sells helmets. Cost Cost Formula Cost of goods sold (variable) $140.000 per unit sold Advertising expenses $ 840.000.000 per quarter Sales commissions 20% of sales Shipping expense ? Executive salaries $540.000.000 per quarter Sales salaries $36.000.000 per quarter Depreciation of sales facilities $300.000.000 per quarter Depreciation of office equipment $40.000.000 per quarter Total manufacturing overhead cost $160.000.000 per quarter Management has concluded that shipping costs are mixed cost, which contains both variable and fixed cost elements. Units sold and associated shipping costs over the past eight quarters: Month Units sold Shipping Expense ($) Year 1: January 5.000 101.500.000 February 6.000 110.600.000 March 9.000 137.900.000 April 10.500 151.550.000 May 10.000 147.000.000 June 11.500 160.650.000 July 11.000 156.100.000 August 12.000 165.200.000 September 13.000 174.300.000 October 12.500 169.750.000 November 13.500 178.850.000 December 4.000 92.400.000 Month Units sold Shipping Expense ($) Year 2: January 6.500 115.150.000 February 7.500 124.250.000 March 8.000 128.800.000 April 14.000 183.400.000 May 14.500 187.950.000 June 5.500 106.050.000 July 15.000 192.500.000 August 15.500 197.050.000 September 9.500 142.450.000 October 8.000 128.800.000 November 8.500 133.350.000 December 9.500 142.450.000 CFO of the Coft Company's wants to know the formula / calculation of reduced costs for shipping expenses so that an income statement with the budgeted contribution format can be prepared for the following quarter. The Questions are: a. By using the high-low method, estimate the cost calculation for shipping expense. b. In the first quarter of Year 3, the company plans to sell 240,000 units at a selling price of $200,000 per unit. Please make an income statement of the variable cost contribution format for the first quarter of Year 3.

The following is data from the Coft Company which manufactures and sells helmets. Cost Cost Formula Cost of goods sold (variable) $140.000 per unit sold Advertising expenses $ 840.000.000 per quarter Sales commissions 20% of sales Shipping expense ? Executive salaries $540.000.000 per quarter Sales salaries $36.000.000 per quarter Depreciation of sales facilities $300.000.000 per quarter Depreciation of office equipment $40.000.000 per quarter Total manufacturing overhead cost $160.000.000 per quarter Management has concluded that shipping costs are mixed cost, which contains both variable and fixed cost elements. Units sold and associated shipping costs over the past eight quarters: Month Units sold Shipping Expense ($) Year 1: January 5.000 101.500.000 February 6.000 110.600.000 March 9.000 137.900.000 April 10.500 151.550.000 May 10.000 147.000.000 June 11.500 160.650.000 July 11.000 156.100.000 August 12.000 165.200.000 September 13.000 174.300.000 October 12.500 169.750.000 November 13.500 178.850.000 December 4.000 92.400.000 Month Units sold Shipping Expense ($) Year 2: January 6.500 115.150.000 February 7.500 124.250.000 March 8.000 128.800.000 April 14.000 183.400.000 May 14.500 187.950.000 June 5.500 106.050.000 July 15.000 192.500.000 August 15.500 197.050.000 September 9.500 142.450.000 October 8.000 128.800.000 November 8.500 133.350.000 December 9.500 142.450.000 CFO of the Coft Company's wants to know the formula / calculation of reduced costs for shipping expenses so that an income statement with the budgeted contribution format can be prepared for the following quarter. The Questions are: a. By using the high-low method, estimate the cost calculation for shipping expense. b. In the first quarter of Year 3, the company plans to sell 240,000 units at a selling price of $200,000 per unit. Please make an income statement of the variable cost contribution format for the first quarter of Year 3.

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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The following is data from the Coft Company which manufactures and sells helmets.

Cost	Cost Formula
Cost of goods sold (variable)	$140.000 per unit sold
Advertising expenses	$ 840.000.000 per quarter
Sales commissions	20% of sales
Shipping expense	?
Executive salaries	$540.000.000 per quarter
Sales salaries	$36.000.000 per quarter
Depreciation of sales facilities	$300.000.000 per quarter
Depreciation of office equipment	$40.000.000 per quarter
Total manufacturing overhead cost	$160.000.000 per quarter

Management has concluded that shipping costs are mixed cost, which contains both variable and fixed cost elements. Units sold and associated shipping costs over the past eight quarters:

Month	Units sold	Shipping Expense ($)
Year 1:
January	5.000	101.500.000
February	6.000	110.600.000
March	9.000	137.900.000
April	10.500	151.550.000
May	10.000	147.000.000
June	11.500	160.650.000
July	11.000	156.100.000
August	12.000	165.200.000
September	13.000	174.300.000
October	12.500	169.750.000
November	13.500	178.850.000
December	4.000	92.400.000

Month	Units sold	Shipping Expense ($)
Year 2:
January	6.500	115.150.000
February	7.500	124.250.000
March	8.000	128.800.000
April	14.000	183.400.000
May	14.500	187.950.000
June	5.500	106.050.000
July	15.000	192.500.000
August	15.500	197.050.000
September	9.500	142.450.000
October	8.000	128.800.000
November	8.500	133.350.000
December	9.500	142.450.000

CFO of the Coft Company's wants to know the formula / calculation of reduced costs for shipping expenses so that an income statement with the budgeted contribution format can be prepared for the following quarter.

The Questions are:
a. By using the high-low method, estimate the cost calculation for shipping expense.
b. In the first quarter of Year 3, the company plans to sell 240,000 units at a selling price of $200,000 per unit. Please make an income statement of the variable cost contribution format for the first quarter of Year 3.

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