Arnall 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: Arnall Ltd. Comparative Income Statements For the Three Months Ended June 30 April 2,500 May 5,600 June 7,300 Sales in units Sales revenue Cost of goods sold 500,000 205,000 1,120,000 459,200 1,460,000 598,600 Gross margin 295,000 660,800 861,400 Selling and administrative expenses: Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation expense 43,700 52,000 148,000 7,400 32,900 80,900 52,000 296,800 7,400 32,900 101,300 52,000 378,400 7,400 32,900 Total selling and administrative expenses 284,000 470,000 572,000 Net operating income (loss) 11,000 190,800 289,400 (Note: Arnall Ltd.'s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by .) Required: 1. Identify each of the company's expenses (including cost of goods sold) as either variable, fixed, or mixed. Expenses Cost of goods sold Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation expense Classification Variable Mixed Fixed Mixed Fixed Fixed 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. (Enter mixed expenses in the order of company expenses provided under question.) Fixed Cost Formula Variable Cost per unit per unit Y = Shipping expense Salaries and commission expense + Y = + 3. Redo the company's income statement at the 7,300-unit level of activity using the contribution format. 1,460,000 Arnall Ltd. Income Statement For the Month Ended June 30 Sales revenue Variable expenses: Cost of goods sold Shipping expense Salaries and commission expense 1,460,000 Total variable expenses Contribution margin Fixed expenses: Shipping expense Advertising expense Salaries and commission expense Insurance Depreciation Total fixed expenses Net operating income 1,460,000