(Appendix 3A)The Accounting Department of Archer Company,a Merchandising Company,has Prepared

question 26

Essay

(Appendix 3A)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.A tabulation has been made of billing expense and sales in units over the last several months,as follows:
The Accounting Department now plans to develop a cost formula for billing expense so that a contribution-type income statement can be prepared for management's use.
Required:
a.Using the least-squares regression method and the equations for a and b,estimate the cost formula for billing expense.
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.

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Definitions:

Intangible Asset

An asset that lacks physical substance but is identifiable and provides future economic benefits, such as patents or trademarks.

Fair Value

An estimate of the market value of an asset or liability, which reflects the price at which an orderly transaction would take place between market participants at the measurement date.

Directly Attributable Costs

Expenses that can be directly linked to the acquisition, construction, or production of an asset, making the asset ready for its intended use.

Mining Exploration

The process of searching for minerals or precious metals in the earth's surface, involving geophysical, geochemical, and geological methods.