Milden Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning, the company has decided to start using a contribution format income statement. To have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas:

Cost Cost Formula

Cost of good sold $26 per unit sold

Advertising expense $183,000 per quarter

Sales commissions 7% of sales

Shipping expense ?

Administrative salaries $93,000 per quarter

Insurance expense $10,300 per quarter

Depreciation expense $63,000 per quarter

Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters follow:

Quarter Units Sold Shipping

Expense

Year 1:

First 29,000 $ 173,000

Second 31,000 $ 188,000

Third 36,000 $ 230,000

Fourth 32,000 $ 193,000

Year 2:

First 30,000 $ 183,000

Second 33,000 $ 198,000

Third 47,000 $ 245,000

Fourth 44,000 $ 221,000

Milden Companys president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.

Required:

1. Using the high-low method, estimate a cost formula for shipping expense based on the