Ch1-3.pdf - 3 Award 7 out of 7.00 points Arnall Ltd a...

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3. Award: 7 out of 7.00 points Arnall 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: Arnall Ltd. Comparative Income Statements For the Three Months Ended June 30 April May June Sales in units 1,800 3,200 4,800 Sales revenue £ 313,200 £ 556,800 £ 835,200 Cost of goods sold 120,600 214,400 321,600 Gross margin 192,600 342,400 513,600 Selling and administrative expenses: Shipping expense 41,300 58,100 77,300 Advertising expense 70,000 70,000 70,000 Salaries and commissions 104,400 157,600 218,400 Insurance expense 9,900 9,900 9,900 Depreciation expense 42,300 42,300 42,300 Total selling and administrative expenses 267,900 337,900 417,900 Net operating income (loss) £ (75,300) £ 4,500 £ 95,700 (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 £.) Required: 1.Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed, ormixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.
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