Parker Company manufactures and sells a single product.
Required:
1.
A partially completed schedule of the company’s total and per unit costs over a relevant range of 60,000 to 100,000 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
60,000
80,000
100,000
Total costs:
Variable costs
$ 150,000
$
$
Fixed costs
360,000
Total costs
$ 510,000
$
$
Cost per unit:
Variable cost
$
$
$
Fixed cost
Total cost per unit
$
$
$
2.
Assume that the company produces and sells 90,000 units during the year at the selling price of $7.50 per unit. Prepare a contribution format income statement for the year.(Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the “$” sign in your response.)
Parker Company
Contribution Format Income Statement
$
$
2.
value: 0.00 points
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 cents per mile.
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 100,000 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.)
3.
value: 0.00 points
Frankel Ltd., a British 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 below:
Frankel Ltd.
Comparative Income Statements
For the Three Months Ended June 30
April
May
June
Sales in units
3,000
3,750
4,500
Sales 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 expenses
272,000
296,000
320,000
Net operating income (loss)
£ (20,000)
£ 19,000
£ 58,000
(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 4,500-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:
£
4.
value: 0.00 points
Alden Company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas:
Cost
Cost Formula
Cost of goods sold
$20 per unit sold
Advertising expense
$170,000 per quarter
Sales commissions
5% of sales
Administrative salaries
$80,000 per quarter
Shipping expense
?
Depreciation expense
$50,000 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
16,000
$160,000
Second
18,000
$175,000
Third
23,000
$217,000
Fourth
19,000
$180,000
Year 2:
First
17,000
$170,000
Second
20,000
$185,000
Third
25,000
$232,000
Fourth
22,0001.
value: 0.00 points
Parker Company manufactures and sells a single product.
Required:
1.
A partially completed schedule of the company’s total and per unit costs over a relevant range of 60,000 to 100,000 units produced and sold each year is given below. Complete the schedule of the company’s total and unit costs.(Round the “Cost per unit” to 2 decimal places. Omit the “$” sign in your response.)
Units Produced and Sold
60,000
80,000
100,000
Total costs:
Variable costs
$ 150,000
$
$
Fixed costs
360,000
Total costs
$ 510,000
$
$
Cost per unit:
Variable cost
$
$
$
Fixed cost
Total cost per unit
$
$
$
2.
Assume that the company produces and sells 90,000 units during the year at the selling price of $7.50 per unit. Prepare a contribution format income statement for the year.(Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the “$” sign in your response.)
Parker Company
Contribution Format Income Statement
$
$
2.
value: 0.00 points
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 cents per mile.
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 100,000 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.)
3.
value: 0.00 points
Frankel Ltd., a British 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 below:
Frankel Ltd.
Comparative Income Statements
For the Three Months Ended June 30
April
May
June
Sales in units
3,000
3,750
4,500
Sales 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 expenses
272,000
296,000
320,000
Net operating income (loss)
£ (20,000)
£ 19,000
£ 58,000
(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 4,500-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:
£
4.
value: 0.00 points
Alden Company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas:
Cost
Cost Formula
Cost of goods sold
$20 per unit sold
Advertising expense
$170,000 per quarter
Sales commissions
5% of sales
Administrative salaries
$80,000 per quarter
Shipping expense
?
Depreciation expense
$50,000 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
16,000
$160,000
Second
18,000
$175,000
Third
23,000
$217,000
Fourth
19,000
$180,000
Year 2:
First
17,000
$170,000
Second
20,000
$185,000
Third
25,000
$232,000
Fourth
22,000
$208,000
Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.
Required:
1.
Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quarters above.(Omit the “$” sign in your response.)
Y = $ + $ X
2.
In the first quarter of Year 3, the company plans to sell 21,000 units at a selling price of $50 per unit. Prepare a contribution format income statement for the quarter.(Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the “$” sign in your response.)
Alden Company
Budgeted Income Statement
For the First Quarter of Year 3
$
Variable expenses:
$
Total variable expenses
Fixed expenses:
Total fixed expenses
$
$208,000
Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.
Required:
1.
Using the high-low method, estimate a cost formula for shipping expense based on the data for the last eight quarters above.(Omit the “$” sign in your response.)
Y = $ + $ X
2.
In the first quarter of Year 3, the company plans to sell 21,000 units at a selling price of $50 per unit. Prepare a contribution format income statement for the quarter.(Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the “$” sign in your response.)
Alden Company
Budgeted Income Statement
For the First Quarter of Year 3
$
Variable expenses:
$
Total variable expenses
Fixed expenses:
Total fixed expenses
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