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	$35 per unit sold
Advertising expense	$210,000 per quarter
Sales commissions	6% of sales
Shipping expense	?
Administrative salaries	$145,000 per quarter
Insurance expense	$9,000 per quarter
Depreciation expense	$76,000 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	10,000	$	119,000
Second	16,000	$	175,000
Third	18,000	$	190,000
Fourth	15,000	$	164,000
Year 2:
First	11,000	$	130,000
Second	17,000	$	185,000
Third	20,000	$	210,000
Fourth	13,000	$	147,000

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 data for the last eight quarters above. (Do not round your intermediate calculations. Round the Variable cost per unit to 2 decimal places.) Find: High Activity Level, Units Sold, Shipping Expense Find: Low Activity Level, Units Sold, Shipping Expense Change: Variable cost per unit: _____ per unit Fixed cost element: Y= _____ + _____X 2.) In the first quarter of Year 3, the company plans to sell 12,000 units at a selling price of $100 per unit. Prepare a contribution format income statement for the quarter. (Do not round your intermediate calculations.) Find Variable Expenses: Total variable expenses: Fixed expenses: Total fixed expenses: