Alden Company has decided to use a contribution format income statement for inte

Question

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:

     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:

     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.

Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quarters above.

In the first quarter of Year 3, the company plans to sell 23,000 units at a selling price of $51 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.)

2.

sales

variable expenses:
    cost of goods sold
    shipping expense
    sales commissions

total variable expenses
    contribution margin

Fixed expenses
    depreciation expense
    advertising expense
    shipping expense
    administrative salaries

Total fixed expenses
    net operating income

  Cost Cost Formula   Cost of goods sold    $21 per unit sold   Advertising expense    $171,000 per quarter   Sales commissions    4% of sales   Administrative salaries    $81,000 per quarter   Shipping expense      ?   Depreciation expense    $51,000 per quarter

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