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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,

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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 $28 per unit sold Advertising expense $185,000 per quarter Sales commissions 6% of sales Shipping expense 2 Administrative salaries $95.000 per quarter Insurance expense $10.500 per quarter Depreciation expense $65,000 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 31,000 33.000 38,000 34,000 $ 175,000 $ 190,000 $232.000 $ 195,000 32,000 35,000 49,000 46,000 $ 185,000 $200,000 $ 247.000 $223,000 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.

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