Module 5 Assignment
ACC 502
Chapter 5

Problem 5-12 – Page 220

1. Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed or mixed.

Variable | Fixed | Mixed | Cost of goods soldShipping expense | Advertising expenseInsurance expenseDepreciation expense | Salaries and commissions |

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

Shipping | Units Sold | Shipping | High activity level | 5000 | 38000 | Low activity level | 4000 | 34000 | | 1000 | 4000 |

Variable cost = $4000/1000 = $4.00
Fixed cost = $38000 – (4x5000) = $18000

Salaries and commissions | Units Sold | Salaries and Commission | High activity level | 5000 | 90000 | Low activity level | 4000 | 78000 | Change | 1000 | 12000 |

Variable cost = $12,000/1000 = $12.00
Fixed cost = $90000 – (12x5000) = $30000

3. Redo the company’s income statement at the 5,000-unit level of activity using the contribution format.

Morrissey & Brown Ltd.Income StatementMonth Ended September 30 | | Sales in units | 5000 | | | Sales revenue | $500,000 | Variable expenses: | | Cost of goods sold | 300000 | Shipping expenses | 38000 | Commissions | 60000 | | | Contribution margin | $102,000 | Fixed expenses: | | Advertising expense | 21000 | Insurance expense | 6000 | Depreciation expense | 15000 | Salaries | 30000 | | | Net operating income | $30,000 |

Problem 5-17 – Page 223

1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!)

Month of July | | Total overhead