Data P2Part II-1:
Morrisey & Brown is a merchandising company that is the sole distributor of a product
that is increasing in popularity among 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	Sept
Sales in units	4,000	4,500	5,000
Sales revenue	$400,000	$450,000	$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 operating income (loss)	$6,000	$18,000	$30,000
Required:
1. Identify each of the company's 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.
3. Redo the company's income statement at the 5,000 unit-level of activity using the contribution margin
format.