Mankel LTD., a merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company’s revenues and expenses (in British pounds) for the last three months are given:
Mankel Ltd.
Comparative Income Statement
For the three months ended June 30
|
|
April |
May |
June |
|
Sales in units |
3,000 |
3,750 |
4,500 |
|
Sales in revenue |
420,000 |
525,000 |
630,000 |
|
Cost of goods sold |
168,000 |
210,000 |
252,000 |
|
Gross margin |
252,000 |
315,000 |
378,000 |
|
Selling and Administrative expenses: |
|
|
|
|
Shipping expense |
44,000 |
50,000 |
56,000 |
|
Advertising expense |
70,000 |
70,000 |
70,000 |
|
Salaries and commissions |
107,000 |
125,000 |
143,000 |
|
Insurance expense |
9,000 |
9,000 |
9,000 |
|
Depreciation expense |
42,000 |
42,000 |
42,000 |
|
Total selling and administrative |
272,000 |
296,000 |
320,000 |
Expenses
Net operating income (loss) (20,000) 19,000 58,000
1. I need to identify each of the company’s expenses (including cost of goods sold) as variable, fixed, or mixed.
2. Using a high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.
3. Redo the company’s income statement at the 4,500 unit level of activity using the contribution format.