Required:

1. Using the high-low method, estimate the cost formula for billing expense. Round off both the fixed cost and the variable cost per thousand units sold to the nearest whole dollar. (5 marks)
2. Assume that the company plans to sell 30,000 units during July at a selling price of $100 per unit. Prepare a budgeted income statement for the month, using the contribution format. Show all items. (10 marks)

200116 Management Accounting Fundamentals Professional Task - Part 1: Group Work Each question is worth 15 marke. Question 1: Contribution format income statement and High-Low Method The acounting department of Archer Company, a merchandising company, has prepared the folkwing analysis Cost Cost Formula Cost of goods sold $ 58 per unit Sales commissions 12% of sales $ 300,000 per month Advertising expenso Administrative salaries $ 160,000 per month 7 Billing expense Depreciation expense $ 82,000 per month The accounting department feels that billing expense is a mixed cost, containing both fixed and variable cost elements. The biling expenses and sales in units over the last several months follow: Units Sold Billing Expenso (thousands) January 9 9 S 30.000 February 11 S 33.000 March 14 5 36.000 April 17 May 15 S42,000 S 39,000 S 35.000 June 12 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 200116 Professional Task - Part 1: Group Work Page 1