Contribution format income statement

Morrisey & Brown, Lid., of Sydney is a merchandising company 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 Three Months Ended September 30 July August September Sales in units 6, 250 6,750 7, 250 Sales $ 656, 250 $ 708,750 $ 761, 250 Cost of goods sold 393, 750 425, 250 456, 750 Gross margin 262, 500 283,500 304, 500 Selling and administrative expenses: Advertising expense 36, 600 36, 600 36, 600 Shipping expense 62,500 66, 300 70, 100 Salaries and commissions 115, 000 121, 900 128, 800 Insurance expense 9, 100 9,100 9,100 Depreciation expense 16,900 16,990 16,900 Total selling and administrative expenses 240, 100 250, 800 261, 500 Net operating income $ 22,400 $ 32,790 $ 43,000 Required: 1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bX. 3. Redo the company's income statement at the 7,250-unit level of activity using the contribution format