Edwards & Shaw is a merchandising company that is the sole distributor of a prod
ID: 2431012 • Letter: E
Question
Edwards & Shaw is a merchandising company that is the sole distributor of a product that is increasing in popularity. The company’s income statement for the three most recent months is listed below.
Edwards and Shaw
Income Statement
For the Three Months Ending September
July
August
September
Sales in Units
4,500
5,000
6,000
Sales Revenue
$675,000
$750,000
$900,000
Cost of Goods Sold
275,000
300,000
350,000
Gross Margin
400,000
450,000
550,000
Operating Expenses:
Advertising Expense
11,000
11,000
11,000
Shipping Expense
27,000
30,000
36,000
Salaries and Commissions
127,500
135,000
150,000
Legal Expense
7,000
7,000
7,000
Depreciation Expense
10,000
10,000
10,000
Total Operating Expenses
182,500
193,000
214,000
Operating Income
$217,500
$257,000
$336,000
Identify each of the company’s individual expenses as either a variable, fixed or mixed cost.
July
August
September
Sales in Units
4,500
5,000
6,000
Sales Revenue
$675,000
$750,000
$900,000
Cost of Goods Sold
275,000
300,000
350,000
Gross Margin
400,000
450,000
550,000
Operating Expenses:
Advertising Expense
11,000
11,000
11,000
Shipping Expense
27,000
30,000
36,000
Salaries and Commissions
127,500
135,000
150,000
Legal Expense
7,000
7,000
7,000
Depreciation Expense
10,000
10,000
10,000
Total Operating Expenses
182,500
193,000
214,000
Operating Income
$217,500
$257,000
$336,000
1) Identify each of the company's expenses as either variable, fixed, or mixed. For the FC list the total fixed costs per month for each month. For VC list the variable cost per unit for each month. For MC 1 list the total average cost per unit for each mixed cost per month. July August September 3 Fixed Costs 8 Variable Costs 5 3 Mixed Costs 4 7Explanation / Answer
July August September Fixed costs, Advertising Expense 11,000 11,000 11,000 Legal Expense 7,000 7,000 7,000 Depreciation Expense 10,000 10,000 10,000 Variable Costs Cost of goods sold 275,000 300,000 350,000 Shipping Expense at $ 6 per unit 27,000 30,000 36,000 Mixed costs; Salaries and Commissions 127,500 135,000 150,000
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