Arnall Ltd., a British merchandising company, is the exclusive distributor of a
ID: 2475858 • Letter: A
Question
Arnall 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:
88,000
(Note: Arnall Ltd.’s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by £.)
Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed, or mixed.
Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. (Enter mixed expenses in the order of company expenses provided under question.)
Redo the company’s income statement at the 5,900-unit level of activity using the contribution format.
Arnall 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:
Explanation / Answer
a Cost of Goods sold Variable Expenses ( 88000/1000 = $ 88 per unit) Selling & Admin Expenses Shipping Mixed Expenses ( Variable & Fixed) Advertising Fixed Salaries Mixed Expenses ( Variable & Fixed) Insurance Fixed Expenses Depreciation Fixed Expenses High Low Method Variuable Cost per unit = Cost at highest Units- Cost at lowest units/ Highest units- Lowest Units Shipping Variuable Cost per unit = 129300-36200/5900-1000 93100/4900 $ 19 per unit Total Variable 19*1000 $19,000 Fixed Cost 36200-19000 $17,200 Salaries & Commission Variable Cost per unit = (319200-84000)/5900-1000 $ 48 per unit Total Variable 1000*48 $48,000 Fixed Cost 84000-48000 $48,000 C 5900 Units Sales Sales Revenue 1180000 COGS -519200 Shipping 19*5900 -112100 Salaries 48*5900 -283200 Contribution Margin 265500
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