High-Low Method
Contribution Form Income Statement
Orange Company
Income Statements
For the three months ended June 30, 202X
P 6A - A
Sales in units
April
May
June
7,000
10,000
9,000
Sales
$ 280,000
$ 400,000
$ 360,000
Cost of goods sold
$ 210,000
$ 300,000
$ 270,000
Gross margin
$ 70,000
$ 100,000
$ 90,000
Operating expenses:
Advertising
$ 5,000
$ 5,000
$ 5,000
Depreciation
$ 3,000
$ 3,000
$ 3,000
Rent
$ 8,000
$ 8,000
$ 8,000
Salaries and commissions
$ 34,000
$ 40,000
$ 38,000
Utilities
$ 12,500
$ 17,000
$ 15,500
Total operating expenses
$ 62,500
$ 73,000
$ 69,500
Net income
$ 7,500
$ 27,000
$ 20,500
Required:
1) Classify each of the six expenses, including cost of goods sold,
as variable, fixed or mixed.
2) For each of the mixed expenses found in requirement (1),
find the cost equation stated in the form: Y = a + bx.
3) Prepare the income statement, for June, in contribution form.
