Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole di

Question

Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow Morrisey & Brown, Ltd Income Statements For the Three Months Ended September 30 July August September 5,000 Sales in units 4,000 4,500 $400,000 240,000 $450,000 270,000 Sales $500,000 300,000 Cost of goods sold Gross margin Selling and administrative expenses 160,000 180,000 200,000 Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 21,000 34,000 78,000 6,000 15,000 21,000 36,000 84,000 6,000 15,000 21,000 38,000 90,000 6,000 15,000 Total selling and administrative expenses 154,000 162,000 170,000 Net operating income S 6,000 S 18,000 S 30,000 Required 1. Identify each of the company's expenses (including cost of goods sold) as either variable, fixed, or mixed Expenses Classification Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense ariable Fixed ixed ixed Fixed Fixed

Explanation / Answer

Req 1. Cost of goods sold Variable Advertising expense Fixed Shipping expense Mixed Salaries and commision Mixed Insurance expense Fixed Depreciation Fixed Req 2 Shipping expense Cost Units High 38000 5000 Low 34000 4000 Change 4000 1000 Variable cost per unit: Change in cost/ Change in units 4000 /1000 = $ 4 pr unit Fixed cost: 34000-4000*4 = $ 18000 Salaries and commission Cost Units High 90000 5000 Low 78000 4000 Change 12000 1000 Variable cost per unit: Change in cost/ Change in units 12000 / 1 000 =12 per unit Fixed: 78000 - 4000*12= 30000 VC Fixed Formula Shipping cost 4 per unit 18000 Y =18000+$ 4 X per unit Salaries and commission 12 per unit 30000 Y = 30000+ $12 X per unit Req 3 Contribution margin income Statement Sales revenue 500000 Variable cost Cost of goods sold 300000 Shipping expense @ 4 20000 Salaries and commission @12 60000 Contribution margin   120000 Fixed cost Advertising 21000 Shipping expense @ 4 18000 Salaries and commission   30000 Insurance 6000 Depreciation 15000 Net Operating income 30000

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