Reference no: EM131260147

Alden Company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas: Cost Cost Formula Cost of goods sold $32 per unit sold Advertising expense $188,000 per quarter Sales commissions 8% of sales Administrative salaries $98,000 per quarter Shipping expense ? Depreciation expense $68,000 per quarter Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters are given below: Quarter Units Sold Shipping Expense Year 1: First 34,000 $178,000 Second 36,000 $193,000 Third 41,000 $235,000 Fourth 37,000 $198,000 Year 2: First 35,000 $188,000 Second 38,000 $203,000 Third 52,000 $250,000 Fourth 49,000 $226,000 Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter. Required: 1. Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quarters above. Y = $ + $ X 2. In the first quarter of Year 3, the company plans to sell 39,000 units at a selling price of $65 per unit. Prepare a contribution format income statement for the quarter. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Alden Company Budgeted Contribution Format Income Statement For the First Quarter of Year 3 $ Variable expenses: $ Total variable expenses Fixed expenses: Total fixed expenses $