For the periods ending 2020, 2021, and 2022, the company provides the following information:

Description	2020	2021	2022
Sales	$6,000,000	$6,400,000	$5,600,000
Cost of goods sold	3,840,000	4,090,000	3,590,000
Sales commissions	750,000	800,000	700,000
Store rent	30,000	30,000	30,000
Depreciation	5,000	5,000	5,000
Maintenance cost	160,000	170,000	150,000
Office salaries	40,000	40,000	40,000
Other expenses	75,000	80,000	70,000
Number of Unit sold	30,000	32,000	28,000

For each period, assume an average selling price of $200. The companys current annual productive capacity without incurring additional costs is 40,000 units.

Required

A. For each cost item listed above, determine if the item is a fixed cost, variable cost, or mixed cost.

B. Using the High-Low method, develop a cost estimation equation for Snip and Clips total cost.

C. For the upcoming year, the companys sales director estimates total sales will equal 35,000 units. Using your cost estimation equation and assuming the selling price remains constant, estimate Snip and Clips operating profit for sales of 35,000 units.

D. Upon reviewing your profit estimate, the sales director was surprised. She had prepared an estimate of profit at 35,000 units and derived a different result. Reviewing her analysis, you observed that the computation was based on estimated sales price and units of $200 and 35,000 units, respectively, and an average total costs = $163.75/unit based on the 2022 actual cost amounts. Given that method, suggest to the sales director why her computation is faulty.

E. Lastly, the sales director asks you to review the 3-year plan, which is based on sales of 34,000, 38,000, and 42,000 units for years 2023,2024, and 2025, respectively. The sales director agrees to use your cost estimate equation for the plan, if you agree. Do you agree with the use of your cost estimation equation for the 3-year plan? Why or why not?