The Central Valley Company Is a Merchandising Firm That Sells

Essay

The Central Valley Company is a merchandising firm that sells a single product.The company's revenues and expenses for the last three months are presented below:
CENTRAL VALLEY COMPANY
Comparative Income Statement for the Second Quarter
$\begin{array}{|l|r|r|r|} \hline& \text { April } & \text { May } & \text { June } \\\hline \text { Sales in units } & \underline{4,500} & \underline{5,250} & \underline{6,000} \\\hline \text { Sales revenue } & \$ 630,000 & \$ 735,000 & \$ 840,000 \\\hline \begin{array}{l}\text { Less: cost of goods } \\\text { sold }\end{array} & 252,000 & 294,000 & 336,000 \\\hline \text { Gross margin } & 378,000 & 441,000 & 504,000 \\\hline \text { Less: operating } & \\\text { expenses } & \\\hline \text { Shipping expense } & 56,000 & 63,500 & 71,000 \\\hline \text { Advertising expense } & 70,000 & 70,000 & 70,000 \\\hline \text { Salaries and } & 143,000 & 161,750 & 180,500 \\\text { commissions }\\\hline \text { Insurance expense } & 9,000 & 9,000 & 9,000 \\\hline \text { Depreciation expense } & \underline{42,000} & \underline{42,000} & \underline{42,000} \\\hline \text { Total operating } & \underline{320,000} & \underline{346,250} & \underline{372,500} \\\hline \text { expenses } & & & \\\hline \text { Net income } & \$ 58,000 & \$ 94,750 & \$ 131,500 \\\hline\end{array}$
Required:
a.Determine which expenses are mixed and,by use of the high-low method,separate each mixed expense into its variable and fixed components.State the cost formula for each mixed expense.
b.Compute the company's total contribution margin for May.