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Question: milden company has an exclusive franchise to purchase a product...

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Milden Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning, the company has decided to start using a contribution format income statement. To have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas Cost Cost of good sold Advertising Cost Formula $30 per unit sold $180,000 per expense quarter Sales commissions Shipping expense Administrative 7% of sales $90,000 per $10,000 per $60,000 per salaries quarter Insurance expense quarter Depreciation expense quarter 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 follow: Units Shipping QuarterSold Expense Year 1 First 26,000 $170,000 Second 28,000 $185,000 Third 33,000 $227,000 Fourth 29,000 $190,000 Year 2 First 27,000 $180,000 Second 30,000 $195,000 Third 40,400 $242,000 Fourth 37,400 $218,000 Milden Companys president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter 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 activity level Change Shipping Units Sold Expense $ 242,000 26,000170,000 14,400 $ 72,000 40,40 Variable cost per unit Fixed cost element 5 per unit $ 40,000 0,000 52. In the first quarter of Year 3, the company plans to sell 35,000 units at a selling price of $60 per unit. Prepare a contribution format income statement for the quarter. (Do not round your intermediate calculations.) Milden Company Budgeted Contribution Format Income Statement For the First Quarter, Year 3 Variable expenses: Total variable expenses 0 0 Fixed expenses: Total fixed expenses 0 0

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