Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company€™s revenues and expenses (in British pounds) for the last three months are given below:

Required:
1. Identify each of the company€™s expenses (including cost of goods sold) as either variable, fixed, or mixed.
2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.
3. Redo the company€™s income statement at the 4,500-unit level of activity using the contributionformat.

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Frankel Ltd. Comparative Income Statements For the Three Months Ended June 30 April May June Sales in units.. Sales revenue Cost of goods sold Gross margin Selling and administrative expenses: 3,000 3,750 4,500 -£420,000 E525,000 E630,000 168,000 210.000 252,000 252,000 315,000 378,000 Shipping expense. .. Advertising expense. Salaries and commissions Insurance expense. Depreciation expense. 44,000 50,000 56,000 .. 70,000 70,000 70,000 107,000 25,000 143,000 9.000 9,000 42,000 42,000 42,000 272,000 296,000 320,000 £ (20,000) E 19,000 58,000 9.000 Total selling and administrative expenses..... Net operating income (loss)