Milden Company has an exclusive franchise to purchase a product from the manufacturer and distrib… 1 answer below »

 
   

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Show transcribed image text Milden 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: Cost Formula Cost $28 per unit sold Cost of good sold $185,000 per quarter Advertising expense Sales commissions 6% of sales Shipping expense $95,000 per quarter Administrative salaries $10,500 per quarter Insurance expense $65,000 per quarter Depreciation expense Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters follow: Shipping Units Sold Quarter Expense Year 1: 31,000 $175,000 First 33,000 $190,000 Second 38,000 $232,000 Third 34,000 $195,000 Fourth Year 2: 32,000 $185,000 First 35,000 $200,000 Second Third 49.000 $247,000 46,000 $223,000 Fourth Milden Company’s 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.