Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole di

Question

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: Morrisey &Brown;, Ltd Income Statements For the Three Months Ended September 30 July August September Sales in units Sales Cost of goods sold GrOSs marcin Selling and administrative expenses: 4,750 546,250 327,750 218,500 5,250 $603,750 362,250 241,500 5,750 $661,250 396,750 264,500 Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 31,800 35,500 81,000 6,550 18,000 172,850 45,650 31,800 38,100 87,300 6,550 18,000 181,750 $59,750 31,800 40,700 93,600 6,550 18,000 190,650 $ 73,850 Total selling and administrative expenses Net operating income

Explanation / Answer

Variable cost element:

Variable rate = Change in cost/ Change in activity

Shipping expense = $5200 / 1000 units = $5.2 Per unit

Salaries and commissions expense = $ 12600 / 1000 units = $12.6 per unit

Fixed cost element:

Less variable cost element

5750 * 5.2 per unit

5750 * 12.6 per unit

72450

Shipping expense: A$10,800 per month plus $5.2 per unit

or Y = A$18,000 + $5.2X

Salaries and commissions expense: $21150 per month plus $12.6 per unit or

Y = $21150 + $12.6 X

Units Shipping Expense Salaries and Commissions Expense High level of activity 5750 40700 93600 Low level of activity 4750 35500 81000 Change 1000 5200 12600

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