Morrisey & Brown, Ltd, of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company?s income statements for the three most recent months follow:

Required:

1. Identify each of the company?s expenses (including cost of goods sold) as being variable fixed, or mixed.

2a. Using the high-low method, separate each mixed expense into variable and fixed elements.

2b. Using the high-low method, state the cost formula for each mixed expense.

3. Redo the company?s income statement at the 6,000-unit level of activity using the contribution format.

Sales in units MORRISEY & BROWN, LTD. Income Statements For the Three Months Ending September 30 July August Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total operating expenses Net income 5,000 A$ 520,000 310,000 210,000 5,500 A$ 572,000 341,000 231,000 September 6,000 A$ 624,000 372,000 252,000 22,000 22,000 22,000 38,000 40,000 41,800 84,000 90,000 95,800 7,000 7,000 7,000 16,000 16,000 16,000 167,000 175,000 182,600 A$ 43,000 A$ 56,000 A$ 69,400 Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Classification A$ A$ A$ Variable Cost per unit A$ per unit A$ per unit A$ Fixed Cost Y= A$ Y= A$ Y= A$ + A$ + A$ + A$ XXX Sales in units MORRISEY & BROWN, LTD. Income Statement For the Month Ended September 30 Less: Variable expenses: Less: Fixed expenses: A$ A$ A$ 6,000