High-Low Method; Contribution format income statement Alden company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed

High-Low Method; Contribution format income statement Alden company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas: Cost Cost Formula Cost of goods sold $20 per unit sold Advertising expense $170,000 per quarter Sales commission 5% of sales Administrative expense 80,000 per quarter Shipping expense ? Depreciation expense 50,000 per quarter Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the remaining shipping expense over the last 8 quarters are given below: Quarter Units Sold Shipping Expense Year1: First 16000 160000 Second 18000 175000 Third 23000 217000 Fourth 19000 180000 Year2: First 17000 170000 Second 20000 185000 Third 25000 232000 Fourth 22000 208000 Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter. 1. Using the high-low method, estimate a cost formula for shipping expense. 2. In the first quarter of year 3, the company plans to sell 21,000 units at the selling price of $50 per unit. Prepare a Contribution Format Income Statement for the quarter.

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