Part I Childress Company has an exclusive franchise to purchase a product from the manufacturer...
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Accounting
Part I
Childress Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning, the company has decided to start using a contribution format income statement. To have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas:
Management has provided you data for units sold and the related shipping expense over the last eight quarters as follows:
Childress Companys president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.
Required:
1. Select an approach and estimate a cost formula for shipping expense. Be sure to explain the approach you selected.
2. In the first quarter of Year 3, the company plans to sell 12,000 units at a selling price of $100 per unit. Prepare a contribution format income statement for the quarter.
Cost Cost Formula Cost of good sold.... . . .. .. $35 per unit sold Advertising expense . . . . .. .$210,000 per quarter Sales commissions . . 6% of sales Sipping expense Administrative salaries . . $145,000 per quarter ...$76,000 per quarter
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