Amall Ltd., a British that is are given below For the Three Months Ended June 30

Question

Amall Ltd., a British that is are given below For the Three Months Ended June 30 Sales in units 1,000 4.100 £200,000 £820,000 £ 1,180,000 519,200 Cost of goods sold 88,000 360,800 112,000 459,200 660,800 Advertising expense Insurance expense Depreciation e 36,200 40,000 84,000 6.200 41,200 95,100 40,000 232,800 6,200 41,200 129,300 40,000 319,200 6,200 41,200 Total selling and administrative expenses 207,600 415,300 535,900 (95.600)43.900124,900 (Note: Arnall Ltd.'s income statement has been recast in the functional format common in the United States The British currency is the pound, denoted by £.) 1. Identify each of the companys expenses (ü mixed

Explanation / Answer

Answer 1. Expenses Classification Cost of Goods Sold Variable Shipping Expense Mixed Advertising Expense Fixed Salaries & Commissions Mixed Insurance Expense Fixed Depreciation Expense Fixed Answer 2. Using the High Low Method - Shipping Expense: Units Expenses Cost Driver - Highest              5,900.00       129,300.00 Cost Driver - Lowest              1,000.00         36,200.00 Difference              4,900.00         93,100.00 Variable Cost = $93,100 / 4,900 Km = $19 per unit Fixed Cost = $129,300 - (5,900 Units X $19) Fixed Cost = $17,200 The linear equation as Per High Low Method - Shipping Expense: Y = $17,200 + $19 X Using the High Low Method - Salaries & Commissions: Units Expenses Cost Driver - Highest              5,900.00       319,200.00 Cost Driver - Lowest              1,000.00         84,000.00 Difference              4,900.00       235,200.00 Variable Cost = $235,200 / 4,900 Km = $48 per unit Fixed Cost = $319,200 - (5,900 Units X $48) Fixed Cost = $36,000 The linear equation as Per High Low Method - Salaries & Commissions: Y = $36,000 + $48 X Answer 3. Arnall Ltd. Income Statement For the Month Ended Jun 30 Sales in Units           5,900.00 Sales in $ 1,180,000.00 Variable Expenses Cost of Goods Sold - 5,900 Units X $88         519,200.00 Shipping Expense - 5,900 Units X $19         112,100.00 Salaries & Commissions - 5,900 Units X $48         283,200.00 Total Variable Expenses       914,500.00 Contribution Margin       265,500.00 Fixed Expenses: Shipping Expense            17,200.00 Advertising Expense            40,000.00 Salaries & Commissions            36,000.00 Insurance Expense              6,200.00 Depreciation Expense            41,200.00 Total Fixed Expenses       140,600.00 Net Operating Income (Loss)       124,900.00

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