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. The billing expenses and sales in units over the last several months follow:
The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use.
Required:
a. Using the least-squares method, estimate the cost formula for billing expense. Round off both the fixed cost and the variable cost per thousand units sold to the nearest whole dollar.
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.

Question

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. The billing expenses and sales in units over the last several months follow:
  The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use.
Required:
a. Using the least-squares method, estimate the cost formula for billing expense. Round off both the fixed cost and the variable cost per thousand units sold to the nearest whole dollar.
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.

Quizplus · Accepted Answer

The Answer of 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. The billing expenses and sales in units over the last several months follow:
  The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use.
Required:
a. Using the least-squares method, estimate the cost formula for billing expense. Round off both the fixed cost and the variable cost per thousand units sold to the nearest whole dollar.
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.

The Accounting Department of Archer Company, a Merchandising Company, Has