Managerial Accounting homework week 1

Required:

1.

A partially completed schedule of the company's total and per unit costs over a relevant range of 67,000 to 107,000 units produced and sold each year is given below. Complete the schedule of the company's total and unit costs. (Round the "Cost per unit" to 2 decimal places. Omit the "$" sign in your response.)

Units Produced and Sold

67,000

87,000

107,000

Total costs:

Variable costs

$247,900

$

$

Fixed costs

390,000

Total costs

$637,900

$

$

Cost per unit:

Variable cost

$

$

$

Fixed cost

Total cost per unit

$

$

$

2.

Assume that the company produces and sells 97,000 units during the year at the selling price of $9.18 per unit. Prepare a contribution format income statement for the year.(Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Parker Company
Contribution Format Income Statement

$

$

Required:

1.

Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Round the "Variable cost per mile" to 3 decimal places and the "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)

Variable cost

$

per mile

Fixed cost

$

per year

2.

Express the variable and fixed costs in the form Y = a + bX. (Round the "Variable cost per mile" to 3 decimal places and the "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)

Y =

$

+

$

X

3.

If a truck were driven 120,000 miles during a year, what total cost would you expect to be incurred? (Round the "Variable cost per mile" to 3 decimal places. Round your intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Total annual cost

$

Frankel Ltd.
Comparative Income Statements
For the Three Months Ended June 30

April

May

June

Sales in units

1,600

3,500

5,250

Sales revenue

£ 276,800

£ 605,500

£ 908,250

Cost of goods sold

105,600

231,000

346,500

Gross margin

171,200

374,500

561,750

Selling and administrative expenses:

Shipping expense

41,800

68,400

92,900

Advertising expense

70,900

70,900

70,900

Salaries and commissions

98,700

174,700

244,700

Insurance expense

8,100

8,100

8,100

Depreciation expense

42,300

42,300

42,300

Total selling and administrative expenses

261,800

364,400

458,900

Net operating income (loss)

£ (90,600)

£ 10,100

£ 102,850

(Note: Frankel Ltd.’s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by £.)

Required:

1.

Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed, or mixed.

Expenses

Classification

Cost of goods sold

Shipping expense

Advertising expense

Salaries and commissions

Insurance expense

Depreciation expense

2.

Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.(Omit the "£" sign in your response.)

Variable Cost

Fixed Cost

Formula

£

per unit

£

Y = £

+

£ X

£

per unit

£

Y = £

+

£ X

3.

Redo the company’s income statement at the 5,250-unit level of activity using the contribution format. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "£" sign in your response.)

Frankel Ltd.
Income Statement
For the Month Ended June 30

£

Variable expenses:

£

Contribution margin

Fixed expenses:

£

Cost

Cost Formula

Cost of goods sold

$34 per unit sold

Advertising expense

$190,000 per quarter

Sales commissions

7% of sales

Administrative salaries

$100,000 per quarter

Shipping expense

?

Depreciation expense

$70,000 per 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 are given below:

Quarter

Units Sold

Shipping
Expense

Year 1:

First

36,000

$180,000

Second

38,000

$195,000

Third

43,000

$237,000

Fourth

39,000

$200,000

Year 2:

First

37,000

$190,000

Second

40,000

$205,000

Third

54,000

$252,000

Fourth

51,000

$228,000