180 Management accounting Problems P5-11 High-low method; contribution profit statement Morrisey & Brown Ltd of Sydney is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's profit statements for the three most recent months follow: Morrisey & Brown Ltd Profit and loss statements For the three months ending 30 September July August September Sales in units 4,000 Sales revenue A$400,000 4.500 A$450,000 5,000 A$500,000 Less cost of goods sold 240,000 270,000 300,000 Gross margin 160,000 180.000 200,000 Less operating expenses: Advertising expense 21,000 21,000 21,000 Shipping expense 34,000 36,000 38,000 Salaries and commissions 78,000 84,000 90,000 Insurance expense 6,000 6,000 6,000 Depreciation expense 15,000 15,000 15,000 Total operating expenses 154,000 162,000 170,000 Net income A$6,000 A$18,000 A$30,000 (Note: The Australian dollar is denoted by AS.) REQUIRED 1 Identify each of the company's expenses (including cost of goods sold) as being either variable, fixed, or mixed. 2 By use of 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 profit statement at the 5,000-unit level of activity using the contribution format