Chapter 6.A, Problem 9P

High-Low Method; Contribution Format Income Statement 106−10
Milden Company is a distributor to ants to start using a contribution format income statement for planning purposes. The company has analysed its expenses and developed the following cost formulas:

Because shipping expense is a mixed cost, the company needs to estimate the ‘variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data:

Required:
1. Us the high-low method, estimate a cost formula for shipping expense in the form Y = a + bX.
2 In the first quarter of Year 3, the company plans to sell 12,000 units at a selling price of SIGO per imit. Prepare a contribution format income statement for the quarter.