Reference no: EM13597419

Frankel Ltd., a British 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 below:

Frankel Ltd.

• Comparative Income Statements
• For the Three Months Ended June 30
• April May June
• Sales in units 1,900 3,300 4,950
• Sales revenue £ 328,700 £ 570,900 £ 856,350
• Cost of goods sold 138,700 240,900 361,350
• Gross margin 190,000 330,000 495,000

Selling and administrative expenses:

• Shipping expense 41,800 58,600 78,400
• Advertising expense 69,900 69,900 69,900
• Salaries and commissions 108,600 163,200 227,550
• Insurance expense 9,700 9,700 9,700
• Depreciation expense 42,700 42,700 42,700

Total selling and administrative expenses 272,700 344,100 428,250

• Net operating income (loss)
• £ (82,700)
• £ (14,100) £ 66,750

!.(Note: Frankel Ltd.'s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by £.)

2.Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. (Omit the "£" sign in your response.)

3.Redo the company's income statement at the 4,950-unit level of activity using the contribution format. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "£" sign in your response.)