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Maryland Novelties Company produces and sells souvenir products. Monthly income statements for two activity levels are provided below: Unit volumes Revenue Less cost of goods sold Gross margin Less operating expenses Salaries and commissions Advertising expenses Administrative expenses Total operating expenses Net income Required 22,800 units $ 171,000 68,400 $ 102,600 22,800 34,200 14,250 71,250 $ 31,350 34,200 units $ 256,500 102,600 $ 153,900 28,500 34, 200 14, 250 76,950 $ 76,950 a. Identify each of the following expenses as fixed, variable, or mixed. b. Use the high-low method to separate the mixed costs into variable and fixed components. c. Prepare a contribution margin income statement at the 22,800-unit level.

Maryland Novelties Company produces and sells souvenir products. Monthly income statements for two activity levels are provided below: Unit volumes Revenue Less cost of goods sold Gross margin Less operating expenses Salaries and commissions Advertising expenses Administrative expenses Total operating expenses Net income Required 22,800 units $ 171,000 68,400 $ 102,600 22,800 34,200 14,250 71,250 $ 31,350 34,200 units $ 256,500 102,600 $ 153,900 28,500 34, 200 14, 250 76,950 $ 76,950 a. Identify each of the following expenses as fixed, variable, or mixed. b. Use the high-low method to separate the mixed costs into variable and fixed components. c. Prepare a contribution margin income statement at the 22,800-unit level.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare a contribution margin income statement at the 22,800-unit level. Maryland Novelties Company Revenue Less: Variable costs Cost of goods sold Salaries and commissions Total variable costs Mixed expense Less: Fixed costs Income Statement Administrative salaries Advertising expense Total fixed costs Net income ✓ $ 171,000 IS 91,200 X $ 114,000 × 68,400✔ 22,800 X IS ✓$ 14,250 34,200✔ 48,450 65,550 X < Required B *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Required C >
Transcribed Image Text:Prepare a contribution margin income statement at the 22,800-unit level. Maryland Novelties Company Revenue Less: Variable costs Cost of goods sold Salaries and commissions Total variable costs Mixed expense Less: Fixed costs Income Statement Administrative salaries Advertising expense Total fixed costs Net income ✓ $ 171,000 IS 91,200 X $ 114,000 × 68,400✔ 22,800 X IS ✓$ 14,250 34,200✔ 48,450 65,550 X < Required B *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Required C >
Maryland Novelties Company produces and sells souvenir products. Monthly income statements for two activity levels are provided below: Unit volumes Revenue Less cost of goods sold Gross margin Less operating expenses Salaries and commissions Advertising expenses Administrative expenses Total operating expenses Net income Required 22,800 units $ 171,000 68,400 $ 102,600 22,800 34,200 14,250 71,250 $ 31,350 34,200 units $ 256,500 102,600 $ 153,900 28,500 34, 200 14, 250 76,950 $ 76,950 a. Identify each of the following expenses as fixed, variable, or mixed. b. Use the high-low method to separate the mixed costs into variable and fixed components. c. Prepare a contribution margin income statement at the 22,800-unit level.
Transcribed Image Text:Maryland Novelties Company produces and sells souvenir products. Monthly income statements for two activity levels are provided below: Unit volumes Revenue Less cost of goods sold Gross margin Less operating expenses Salaries and commissions Advertising expenses Administrative expenses Total operating expenses Net income Required 22,800 units $ 171,000 68,400 $ 102,600 22,800 34,200 14,250 71,250 $ 31,350 34,200 units $ 256,500 102,600 $ 153,900 28,500 34, 200 14, 250 76,950 $ 76,950 a. Identify each of the following expenses as fixed, variable, or mixed. b. Use the high-low method to separate the mixed costs into variable and fixed components. c. Prepare a contribution margin income statement at the 22,800-unit level.
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