Question

Redo the company’s income statement at the 5,000-unit level of activity using the contribution format.

Answer 1

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.) 
Shipping Expense: 
(86,200 - 45,900) / (5,100 - 2,000) = £13 variable cost per unit 
86,200 - (13 x 5,100) = £19,900 fixed cost 
£ Y = £19,900 + £13 X 

Salaries and Commissions 
(238,400 - 114,400) / (5,100 - 2,000) = £40 variable cost per unit 
238,400 - (40 x 5,100) = £34,400 fixed cost 
£ Y = £34,400 + £40 X 

3. 
Redo the company’s income statement at the 5,100-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 
Sales revenue 912900 
Variable expenses: 
Cost of goods sold 346800 
Shipping expenses 5,100 x 13 = 66,300 
Commissions 5,100 x 40 = 204,000 

Contribution margin 295,800 

Fixed expenses: 
Fixed shipping 19,900 
Insurance expenses 9000 
Depreciation expenses 42700 
Sales salaries 34,400 
Advertising expenses 69200 

Net operating Income 120600