Cosgrove Company, Inc. is a wholesaler that distributes a single product. The co

Question

Cosgrove Company, Inc. is a wholesaler that distributes a single product. The company's revenues and expenses for the last three months are given below:

Required:

Identify the fixed and variable costs associated with Cosgrove.

Calculate the average costs per month.

Cosgrove Company Traditional Format Income Statement For the Three Months Ended June 30 April May June 3,000 3,750 4,500 $420,000 $525,000 $630,000 168,000 210,000 252,000 252,000 315,000 378,000 Gross margin. . . . Selling and administrative expenses: 4,000 50,000 56,000 70,000 70,000 70,000 107,000 125,000 143,000 9,000 42,000 42,000 42.000 Advertising expense.... 9,000 9,000 Insurance expense Depreciation expense. ... Total selling and administrative expense S(20,000) $19,000 S58,000

Explanation / Answer

Solution

Fixed cost = Advertising expense + Insurance expense + Depreciation expense

Variable cost = Shipping expense + Salaries and comissions *

* Salaries are fixed costs and commissions are variabel costs

Average cost

April = 272,000/3,000 = 90.67

May = 296,000/3,750 = 78.93

June = 320,000/4,500 =71.11

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