Reference no: EM13376770

Morris & Brown, Ltd

Income Statements

                                                    For the Three Months Ended September 30

                                                     July                        August                  September

Sales in units                               4000                              4500                       5000      

Sales revenue                          A$400,000             A$450,000          A$500,000

Cost of good sold                        240,000                      270,000 300,000

Gross margin                               160,000                       180,000 200,000

Selling and administrative expenses:

Advertising expense                 21,000                        21,000                   21,000

Shipping expense                       34,000                        36,000                   38,000

Salaries& commission             78,000                          84,000                   90,000

Insurance expense                  6,000                            6,000                     6,000

Depreciate expense                 15,000                         15,000                   15,000

Total selling& admin expens 154,000                       162,000 170,000

Net operation income       A$ 6000                      A$ 18,000                A$30,000

Question:

(1) Identify each of the company's expenses (including cost of good sold) as either variable, fixed, or mixed.

(2) Using the 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 5,000-unit level of activity using the contribution format.