The accountants at the company believe shipping expense to be a mixed cost conta

Question

The accountants at the company believe shipping expense to be a mixed cost containing both variable and foxed cost elements. They have gathered data related to the units sokd and the related shipping expense. This data for the past two years, by quarter, is shown belc Units Shipping Quarter Sold Expense Year First 33,000 $177,000 Second 35,000 $192,000 Third 40,000 $234,000 Fourth 36,000 $197,000 Year 2: First 34,000 $187,000 Second 37.000 $202,000 Third 48,750 $240,000 Fourth 45,750 $216,000 The company needs help in developing a cost formula for shipping expense in order to prepare a budgeted contribution format Inoome statement for the next quarer Required: 1. Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quarters above. High activity level Low Chance 48,750 $ 240,000 33,000 177.000 63,000 evel variable cost per $ 4 per unit Fixed cost element $ 45,000 units at a seling price of $80 per unit. Prepare a contribution format income contribution format income statement for the quarter. (Do not round your intermediate calculations.) 2. In the first quarter of Year 3, the company plans to sell 43,000 units at a selling price of $80 per unit. Prepare a eli 43,000 Budgeted Contribution Format Income Statement Variable ex Total varlable e Fixed expenses Total fixed ex

Explanation / Answer

1) Using high low method estimated cost formula:

Y = a+bx

Y = 45000+4X

Contribution format income statement :

Note: I done question of the basis of available data but i feel some question data for preparing income statement is missing...

Unit sold Shipping expense High activity level 48750 240000 Low activity level 33000 177000 Change 15750 63000 Variable cost per unit 4 per unit Fixed cost element 45000

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