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 Formula $31 per unit sold $187,000 per quarter 7% of sales Cost Cost of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense ? $97,000 per quarter $10,700 per quarter $67,000 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: Shipping Expense Units Sold Quarter Year 1: First Second Third Fourth Year 2 First Second Third Fourth 33,000 35,000 40,000 36,000 $177,000 $ 192,000 $234,000 $ 197,000 34.000 37,000 48,750 45,750 $ 187,000 $ 202,000 $240,000 $216,000 Milden Company's 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. Shipping Expense Units Sold High activity level Low activity level Change 0 $ 0 Variable cost per unit per unit Fixed cost element Y = X 2. In the first quarter of Year 3, the company plans to sell 43,000 units at a selling price of $60 per unit. Prepare a contribution format income statement for the quarter. (Do not round your intermediate calculations.) Milden Company Budgeted Contribution Format Income Statement For the First Quarter, Year 3 Sales Variable expenses: Cost of goods sold Sales commissions Shipping expense 0 0 Total variable expenses Contribution margin Fixed expenses: Advertising expense Shipping expense Insurance expense Depreciation expense Total fixed expenses 0 Net operating income $ 0