Bath Bomb Delight Co. manufactures organic bath bombs. The company's income statements for the last two years are given below: 2020 2021 Units sold 114,000 107,000 Sales $ 1,015,000 $ 952,675 Cost of goods sold 612,500 574,890 Gross margin 402,500 377,785 Selling expenses 187,500 179,500 Administrative expenses 52,000 52,000 Net income 163,000 146,285 The company has no beginning or ending inventories. Required:

a. Use the high-low method to determine the cost formula for the selling expenses, which are a mixed cost. When performing calculations round to the nearest cent (i.e. $6.9422 = $6.94) (5 marks)

b. The company expects to sell 112,000 units next year. Prepare the budgeted income statement using the contribution format for this level of activity. No heading required. (7 marks)