The accounting department of Blackwell Pty Ltd, a merchandising company, has prepared the following analysis: Cost...
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The accounting department of Blackwell Pty Ltd, a merchandising company, has prepared the following analysis: Cost Cost of goods sold Sales commissions Advertising expense Administrative salaries Billing expense Depreciation expense January February March April May June Units Sold (thousands) 13 Cost Formula $67 per unit 15% of sales The accounting department feels that billing expense is a mixed cost, containing both fixed and variable cost elements. The billing expenses and sales in units over the last several months follow: 11 16 17 19 14 $400,000 per month $200,000 per month ? $95,000 per month Billing Expense $39,000 $37,000 $42,000 $44,000 $47,000 $41,000 The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use. Required: a. Using the high-low method, estimate the cost formula for billing expense. Round fixed cost to the nearest whole dollar. Round the variable cost if per thousand units sold to the nearest whole dollar or if per unit sold to the nearest cent. (5 marks) b. Assume that the company plans to sell 35,000 units during July at a selling price of $120 per unit. Prepare a budgeted income statement for the month, using the contribution format. Show all items. (10 marks) The accounting department of Blackwell Pty Ltd, a merchandising company, has prepared the following analysis: Cost Cost of goods sold Sales commissions Advertising expense Administrative salaries Billing expense Depreciation expense January February March April May June Units Sold (thousands) 13 Cost Formula $67 per unit 15% of sales The accounting department feels that billing expense is a mixed cost, containing both fixed and variable cost elements. The billing expenses and sales in units over the last several months follow: 11 16 17 19 14 $400,000 per month $200,000 per month ? $95,000 per month Billing Expense $39,000 $37,000 $42,000 $44,000 $47,000 $41,000 The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use. Required: a. Using the high-low method, estimate the cost formula for billing expense. Round fixed cost to the nearest whole dollar. Round the variable cost if per thousand units sold to the nearest whole dollar or if per unit sold to the nearest cent. (5 marks) b. Assume that the company plans to sell 35,000 units during July at a selling price of $120 per unit. Prepare a budgeted income statement for the month, using the contribution format. Show all items. (10 marks)
Expert Answer:
Answer rating: 100% (QA)
a High 16 42000 672000 17 44000 748000 Variable cost per unit 67200074... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
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