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 Folmula l[lost of good sold $30 per unit sold Advertising expense $180,000 per quarter Sales commissions 2% of sales Shipping expense ? Administrative salaries $00,000 per quarter Insurance expense $10,000 per quarter Depreciation expense $00,000 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: Shipphg Quarter Units Sold Expense Year 1: First 20,000 $1T0,000 Second 20,000 $105,000 Third 33,000 $22,000 Fourth 20,000 $100,000 Year 2: First 22,000 $100,000 Second 30,000 $105,000 Third 40,400 $242,000 Fourth 32,400 $213,000 lv'lilden lCompany's president would like a cost formula derived for shipping expense so that a budgeted contribution fonnat income statement can be prepared for the next quarter. Required: 1. Using the highlow method, estimate a cost formula for shipping expense based on the data for the last eight quarters above. High activity level Low activity level Cha n ge Fixed cost element _ I:I:I 2. In the rst quarter of Year 3, the company plans to sell 35,l]l] units at a selling price of $50 per unit. Prepare a contribution format income statement for the quarter. [Do not round 1Jrolur intermediate calculations.) 1|ulan'able expenses: Total 1.I'ariable expenses Fixed expenses: Total forced expenses