Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Textbook Question
Chapter 5.A, Problem 7P
Problem 5A-7 Cost Behavior; High-Low Method; Contribution Format Income Statement LO5-10
Morrissey & 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:
Morrissey& Brown, Ltd.
Income Statements
For the Three Months Ended September 30
July | August | September | ||
Sales in units. | 4,000 | 4,500 | 5,000 | |
Sales | $400,000 | $450,000 | $500,000 | |
Cost of goods sold | 240,000 | 180,000 | 200,000 | |
Selling and administrative expenses: | ||||
Advertising expenses | 21,000 | 21,000 | 21,000 | |
Shipping expense | 34,000 | 36,000 | 38,000 | |
Salaries and commissions | 78,000 | 84,000 | 90,000 | |
Insurance expense | 6,000 | 6,000 | 6,000 | |
Depreciation expense | 15,000 | 15,000 | 1 5,000 | |
Total selling and administrative expenses | 154,000 | 162,000 | 170,000 | |
Net operating income | $6,000 | $18,000 | $30,000 |
Required;
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. |
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. |
Redo the company's income statement at the 5,000-unit level of activity using the contribution format |
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Required:
1. Determine the…
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.
Item 10
Required information
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[The following information applies to the questions displayed below.]
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales
$ 70,000
Variable expenses
38,500
Contribution margin
31,500
Fixed expenses
23,310
Net operating income
$ 8,190
10. How many units must be sold to achieve a target profit of $18,900?
12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)
Chapter 5 Solutions
Managerial Accounting
Ch. 5.A - EXERCISE 5A-1 High-Low Method LO5-10 The Cheyenne...Ch. 5.A - EXERCISE 5A-2 Least-Squares Regression LO5-11...Ch. 5.A - EXERCISE 5A-3 Cost Behavior; High-Low Method...Ch. 5.A - Prob. 4ECh. 5.A - EXERCISE 5A-5 Least-Squares Regression LO5-11...Ch. 5.A - Prob. 6PCh. 5.A - Problem 5A-7 Cost Behavior; High-Low Method;...Ch. 5.A - Problem 5A-8 High-Low Method; Predicting Cost...Ch. 5.A - Prob. 9PCh. 5.A - Prob. 10P
Ch. 5.A - Case 5A-11 Mixed Cost Analysis and the Relevant...Ch. 5.A - CASE 5A-12 Analysis of Mixed Costs in a Pricing...Ch. 5 - Prob. 1QCh. 5 - Often the most direct route to a business decision...Ch. 5 - Prob. 3QCh. 5 - What is the meaning of operating leverage?Ch. 5 - What is the meaning of break-even point?Ch. 5 - 5-6 In response to a request from your immediate...Ch. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 1AECh. 5 - Prob. 2AECh. 5 - Prob. 3AECh. 5 - Prob. 4AECh. 5 - Prob. 5AECh. 5 - Prob. 1F15Ch. 5 - Prob. 2F15Ch. 5 - Prob. 3F15Ch. 5 - Prob. 4F15Ch. 5 - Prob. 5F15Ch. 5 - Prob. 6F15Ch. 5 - Prob. 7F15Ch. 5 - Prob. 8F15Ch. 5 - Prob. 9F15Ch. 5 - Prob. 10F15Ch. 5 - Prob. 11F15Ch. 5 - Prob. 12F15Ch. 5 - Prob. 13F15Ch. 5 - Prob. 14F15Ch. 5 - Prob. 15F15Ch. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - EXERCISE 5-10 Multiproduct Break-Even Analysis...Ch. 5 - Prob. 11ECh. 5 - EXERCISE 5-12 Multiproduct Break-Even Analysis...Ch. 5 - EXERCISE 5-13 Changes in Selling Price, Sales...Ch. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 19PCh. 5 - PROBLEM 5-20 CVP Applications: Break-Even...Ch. 5 - PROBLEM 5-21 Sales Mix; Multiproduct Break-Even...Ch. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 -
PROBLEM 5-26 CVP Applications; Break-Even...Ch. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 -
PROBLEM 5-31 Interpretive Questions on the CVP...Ch. 5 - Prob. 32C
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