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?