10 per unit examplemixedcost sales salaries and

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Unformatted text preview: 40,000 units = $0.10 per unit Example – Mixed Cost Sales salaries and commissions are $10,000 when 80,000 units are sold, and $14,000 when 120,000 units are sold. Using the high-low method, what is the fixed portion of sales salaries and commissions? Total cost = Fixed cost + Total variable cost $14,000 = Fixed cost + ($0.10 × 120,000 units) Fixed cost = $14,000 - $12,000 Fixed cost = $2,000 Learning Objective 5 Prepare income statements for a merchandising company using the traditional and contribution formats The Traditional and Contribution Formats Comparison of the Contribution Income Statement with the Traditional Income Statement Traditional Format Sales Cost of goods sold Gross margin Selling & admin. expenses Net operating income Contribution Format $ 100,000 70,000 $ 30,000 20,000 $ 10,000 Used primarily for external reporting Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 100,000 60,000 $ 40,000 30,000 $ 10,000 Used primarily by management Uses of the Contribution Format The contribution income statement format is used as an internal planning and decisionmaking tool We...
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This document was uploaded on 02/06/2014.

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