Operations management (MBA 706)

The Specter Company is a merchandising firm that sells a single product. The company's revenues and expenses for the last three months are given below: April May June Sales in units 4,500 5,250 6,000 Sales revenue $630,000 $735,000 $840,000 Less cost of goods sold 252,000 294,000 336,000 Gross Margin 378,000 441,000 504,000 Less operating expenses: Shipping expense 56,000 63,500 71,000 Advertising expense 70,000 70,000 70,000 Salaries and commissions 143,000 161,750 180,500 Insurance expense 9,000 9,000 9,000 Depreciation expense 42,000 42,000 42,000 Total operating expenses 320,000 346,250 372,500 Net income $58,000 $94,750 $131,500 

Required:

 a. Determine which expenses are mixed and, by use of the high-low method, separate each mixed expense into its variable and fixed components. State the cost formula for each mixed expense. All calculations must be shown. 

 b. Compute the company's total contribution margin for May. Calculation must be shown.