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CHECK FIGURE (2) Shipping: A$18,000 per month plus A$4 per unit Morrisey & Brown, Ltd. of Sydney, Australia, is a merchandising firm that is the
CHECK FIGURE (2) Shipping: A$18,000 per month plus A$4 per unit 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: MORRISEY & BROWN, LTD. Income Statements For the Four Quarters Ending December 31 Quarter 1 1 Quarter 2 4.400 4,000 Quarter 3 Quarter 4 Sales in units 4.600 Sales revenue A$440,000 A$460,000 A$400,000 240,000 5.000 A$500,000 300.000 200.000 Less: Cost of goods sold 276,000 264.000 176,000 Gross margin 160,000 184,000 Less: Operating expenses: Advertising expense 21,000 21,000 21,000 21.000 Shipping expense 35,000 34,000 38,000 36,000 Salaries and commissions 83,000 78,000 90,000 85,000 6,000 -15.000 Insurance expense 6,000 6,000 6,000 Depreciation expense 15.000 15.000 -15.000 Total operating expenses 160,000 154.000 - 170.000 Net income A$ 16.000 A$_6.000 A$ 30.000 (Note: Morrisey & Brown, Ltd.'s Australian-formatted income statement has been recast into the format common in Canada. The Australian dollar is denoted by A$ . 163.000 A$21.000 Page 263 Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed clements. State the cost formula for each mixed expense 3. Redo the company's income statement at the 5,000-unit level of activity using the contribution format. 4. Assume that the company's sales are projected to be 4,500 units in the next quarter. Prepare a contribution margin income statement
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