(Appendix 6A)The Accounting Department of Archer Company,a Merchandising Company,has Prepared

Essay

(Appendix 6A)The Accounting Department of Archer Company,a merchandising company,has prepared the following analysis:


The Accounting Department feels that billing expense is a mixed cost, containing both fixed and variable cost elements. A tabulation has been made of billing expense and sales in units over the last several months, as follows:

The Accounting Department now plans to develop a cost formula for billing expense so that a contribution-type income statement can be prepared for management's use.

Required:

a. Using the least-squares regression method and the equations for a and b, estimate the cost formula for billing expense.
b. Assume that the company plans to sell 30,000 units during July at a selling price of $100 per unit. Prepare a budgeted income statement for the month, using the contribution format.