Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The companys revenues and expenses (in British pounds) for the last three months are given below:

(Note: Frankel Ltd.s income statement has been recast in the functional format common in the United States. The British currency is the pound, denoted by .)

1. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.

2. Redo the companys income statement at the 4,500-unit level of activity using the contribution format

Frankel Ltd Comparative Income Statements For the Three Months Ended June 30 April May June Sales in units 3,000 3,750 4,500 Sales revenue 420, 000 168,000 525,000 210,000 630,000 252,000 Cost of goods sold Gross margin Selling and administrative expenses 252,000 315,000 378,000 Shipping expense Advertising expense Salaries and commissions Insurance expense Depreciation 44,000 70,000 107,000 9,000 42,000 50,000 70,000 125,000 9,000 42,000 56,000 70,000 143,000 9,000 42,000 i expense Total selling and administrative expenses 272,000 296,000 320,000 Net operating income (loss) (20,000 19, 19,000 E 58,000