Maryland Novelties Company Produces and Sells Souvenir Products Required:
1) Identify the Mixed Expense(s)

Essay

Maryland Novelties Company produces and sells souvenir products. Monthly income statements for two activity levels are provided below:
$\begin{array}{|l|l|lr|}\hline \text { Unit volumes } &{20,000 \text { units }} &{30,000 \text { units }} \\\hline \text { Revenue } & \$ 150,000 & \$ 225,000 \\\hline \text { Less cost of goods sold } & 60,000 & 90,000 \\\hline \text { Gross margin } & \$ 90,000 & \$ 135,000 \\\hline \text { Less operating expenses } & & & \\\hline \text { Salaries and commissions } & 20,000 & 25,000 \\\hline \text { Advertising expenses } & 30,000 & 30,000 \\\hline \text { Administrative expenses } & 12,500 & 12,500 \\\hline\text { Total operating expenses }&62,500&67,500\\\hline\text { Net income }&\427,500&\$67,500\\\hline\end{array}$ Required:
1) Identify the mixed expense(s).2) Use the high-low method to separate the mixed costs into variable and fixed components.3) Prepare a contribution margin income statement at the 20,000-unit level.