contribution format income statement 458856

Mankel LTD., a 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:

Mankel Ltd.
Comparative Income Statement
For the three months ended June 30

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April

May

June

Sales in units

3,000

3,750

4,500

Sales in revenue

420,000

525,000

630,000

Cost of goods sold

168,000

210,000

252,000

Gross margin

252,000

315,000

378,000

Selling and Administrative expenses:

 

 

 

Shipping expense

44,000

50,000

56,000

Advertising expense

70,000

70,000

70,000

Salaries and commissions

107,000

125,000

143,000

Insurance expense

9,000

9,000

9,000

Depreciation expense

42,000

42,000

42,000

Total selling and administrative

272,000

296,000

320,000

Expenses
Net operating income (loss) (20,000) 19,000 58,000

1. I need to identify each of the company’s expenses (including cost of goods sold) as variable, fixed, or mixed.

2. Using a high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.

3. Redo the company’s income statement at the 4,500 unit level of activity using the contribution format.

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