ACCOUNTING Problems Questio 100 points Frankel Ltd a Brtish

ACCOUNTING Problems Questio 100 points Frankel Ltd, a Brtish merchandising company, is the exclusive distributor of a product that is gaining rapid are given below companý\'s revenues and expenses (in British pounds) for the last three months Frankel Ltd Comparative Income Statements For the Three Months Ended June 30 May 3.200 Sales in units 2 000 4800 Sales revenue 342 000 £ 547 200 £820,800 140000 224,000 336.000 Cost of goods sold Gross margin Selling and administrative expenses 202.000 323.200 484,800 Shipping expense Advertising expense 77 800 0,900 70,900 117,200166,400 232.000 9.800 41,900 4,200 58.600 70,900 7 9,800 1,900 41900 Insurance expense 9800 Total selling and administrative expenses Net operating income (los) 284,000 347 600 432.400 E (82.000) £ (24400) E 52400 Franke·Ltd sinom staterment has been recast inthe functional format common inthe Stabes The Bitish currency is the pound, denoted by £ Required: 1. Benthy each of thw company\'s expences (ncluding cost of goods sold) as either variable, fxed o Cost of goods sold Shipping expense Click to (Click to selec) Click to select) Click to select Click to select) nsurance expense O Type here to search

Solution

Expenses

Classification

Cost of goods sold

Variable

Shipping expense

Mixed

Advertising expense

Fixed

  Salaries and commissions

Mixed

Insurance expense

Fixed

Depreciation expense

Fixed

2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense:

Analysis of the mixed expenses:

Units

Shipping
Expense

Salaries and Commissions

High level of activity

4800

77800

232000

Low level of activity

2000

44200

117200

2800

33600

114800

  Variable cost element

Variable cost per unit  =Change in cost / Change in activity

Shipping expense: £33600/2800 units=£12 per unit

Salaries and commissions: £114800/2800 units  = £41 per unit

Fixed cost element:

                                                         Shipping Expense                   Salaries and Commissions

Cost at high level of activity

77800

232000

Less variable cost element:

      4800 units × £12 per unit

57600

      4800 units × £41 per unit

196800

Fixed cost element

20200

35200

The cost formulas are:

Shipping expense: £20200 per month plus £12 per unit or

Y = £20200 + £12X.

Salaries and Commissions: £35200 per month plus £41 per unit or

Y = £35200 + £41X.

3. Redo the company’s income statement at the 4,500-unit level of activity using the contribution format

Frankel Ltd.
Income Statement
For the Month Ended June 30

Sales revenue

820800

Variable expenses:

Cost of goods sold

336000

Shipping expense

57600

Sales commissions

196800

590400

230400

Contribution margin

Fixed expenses:

Shipping expense

20200

Advertising expense

70900

Sales salaries

35200

Insurance expense

9800

Depreciation expense

41900

178000

Net operating income

52400

Expenses	Classification
Cost of goods sold	Variable
Shipping expense	Mixed
Advertising expense	Fixed
Salaries and commissions	Mixed
Insurance expense	Fixed
Depreciation expense	Fixed