MANAGERIAL ACCT.F/MANAGERS>CUSTOM<
4th Edition
ISBN: 9781307090147
Author: Noreen
Publisher: MCG/CREATE
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Chapter 2, Problem 2.16P
Cost Behavior; High-Low Method; Contribution Format Income Statement [LO 2-4, LO 2-5, LO 2-6]
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:
![Chapter 2, Problem 2.16P, Cost Behavior; High-Low Method; Contribution Format Income Statement [LO 2-4, LO 2-5, LO 2-6]](http://dev-ingestion-image-output.s3-website-us-east-1.amazonaws.com/9781259578540/Chapter-2/images/html_q_78540-2-2.16p_1.png)
Required:
- 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.
- Redo the company’s income statement at the 5,000-unit level of activity using the contribution format.
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Cost Behavior; High-Low Method; Contribution Format Income Statement
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:
Required:
1. By analyzing the data from the company’s income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bX.
3. Redo the company’s income statement at the 5,000-unit level of activity using the contribution format.
Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November.
Sales (5,700 units)
$319,200
Variable expenses
188,100
Contribution margin
131,100
Fixed expenses
106,500
Net operating income
$24,600
If the company sells 5,300 units, its net operating income should be closest to:
Group of answer choices
$24,600
$2,200
$22,874
$15,400
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Question Content Area
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage
Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
EstimatedFixed Cost
Estimated Variable Cost(per unit sold)
Production costs:
Direct materials
—
$46
Direct labor
—
40
Factory overhead
$200,000
20
Selling expenses:
Sales salaries and commissions
110,000
8
Advertising
40,000
—
Travel
12,000
—
Miscellaneous selling expense
7,600
1
Administrative expenses:
Office and…
Chapter 2 Solutions
MANAGERIAL ACCT.F/MANAGERS>CUSTOM<
Ch. 2 - Prob. 2.1QCh. 2 - Prob. 2.2QCh. 2 - Prob. 2.3QCh. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - Prob. 2.11QCh. 2 - Give the general formula for a mixed cost. Which...Ch. 2 - What is meant by the term least-squares...Ch. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16QCh. 2 - Prob. 2.17QCh. 2 - Prob. 1AECh. 2 - Prob. 1TF15Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 2.3ECh. 2 - Prob. 2.4ECh. 2 - High-Low Method (LO 2-5) The Cheyenne Hotel in Big...Ch. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Cost Behavior; High-Low Method [LO 2-4, LO 2-5]...Ch. 2 - Cost Terminology for Manufacturers [LO 2-2, LO...Ch. 2 - Prob. 2.10ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Prob. 2.15ECh. 2 - Cost Behavior; High-Low Method; Contribution...Ch. 2 - High-Low Method; Predicting Cost [LO 2-4, LO 2-5]...Ch. 2 - Prob. 2.18PCh. 2 - Prob. 2.19PCh. 2 - High-Low Method; Predicting Cost [LO 2-4, LO 2-5]...Ch. 2 - Prob. 2.21PCh. 2 - High-Low Method; Contribution Format Income...Ch. 2 - Scattergraph Analysis; Selection of an Activity...
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