1. Hart and Brown Ltd is a merchandising company based in California. The companys income statements for three most recent months given below:

Hart and Brown Ltd.

Income Statements

For the months Ended December 31

	October	November	December
Sales in Units	8,000	9,000	10,000
Sales revenue	$800,000	$900,000	$1,000,000
Cost of Goods Sold	480,000	540,000	600,000
Gross Margin	$320,000	$360,000	$ 400,000
Selling and Administrative Expenses:
Advertising expense	$42,000	$42,000	$42,000
Shipping expense	68,000	72,000	76,000
Salaries and commissions	156,000	168,000	180,000
Insurance expense	12,000	12,000	12,000
Depreciation expense	30,000	30,000	30,000
Total Selling and Administrative expense	$308,000	324,000	340,000
Net Operating Income	$ 12,000	$ 36,000	$ 60,000

Required:

1. Identify each of the companys expense as variable cost, fixed cost or mixed cost
2. Using high low method, separate each mixed expense into variable and fixed elements, State the cost formula of each mixed expense.
3. Prepare the companys income statement at the 10,000 unit level of activity using the contribution format income statement.