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 of good sold Advertising expense Sales commissions Shipping expense Administrative salaries Insurance expense Depreciation expense Cost Formula $26 per unit sold $176,000 per quarter 8% of sales $86,000 per quarter $9,600 per quarter $56,000 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: Units Sold Shipping Expense Quarter Year 1 First Second Third Fourth Year 2 First Second Third Fourth 22,000 24.000 29,000 25,000 $166,000 $ 181,000 $223,000 S 186,000 23.000 26.000 34,000 31,000 $176.000 $191,000 $238,000 $214,000 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 2. In the first quarter of Year 3, the company plans to sell 27,000 units at a selling price of $56 per unit. Prepare a contribution format income statement for the quarter. (Do not round your intermediate calculations.) 1,512,000 Milden Company Budgeted Contribution Format Income Statement For the First Quarter, Year 3 Sales $ Variable expenses: Cost of goods sold $ 702,000 Sales commissions 120.960 Shipping expense 822,960 689,040 176.000 Total variable expenses Contribution margin Fixed expenses Advertising expense Shipping expense Administrative salaries Insurance expense Depreciation expense 86,000 9,600 56,000 327.000 361.440 Total fixed expenses Net operating income