Problem
Palladium Company is a merchandiser that sells its only product for $128 per unit. The company provided the following cost data for two levels of monthly sales volume:
Sales in units 4,000 5,000
Cost of goods sold $280,000 $350,000
Selling and administrative expenses $240,000 $270,000
Required:
1. Is cost of goods sold a variable, fixed, or mixed cost?
2. Are the selling and administrative expenses a variable, fixed, or mixed cost?
3. Using the high-low method, what would be the estimated total contribution margin when 4,600 units are sold?
4. Using the high-low method, what would be the estimated net operating income when 4,600 units are sold?