Milden Company is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas:

Cost	Cost Formula
Cost of good sold	$24 per unit sold
Advertising expense	$174,000 per quarter
Sales commissions	8% of sales
Shipping expense	?
Administrative salaries	$84,000 per quarter
Insurance expense	$9,400 per quarter
Depreciation expense	$54,000 per quarter

Because shipping expense is a mixed cost, the company needs to estimate the variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data:

Quarter	Units Sold	Shipping Expense
Year 1:
First	20,000	$	164,000
Second	22,000	$	179,000
Third	27,000	$	221,000
Fourth	23,000	$	184,000
Year 2:
First	21,000	$	174,000
Second	24,000	$	189,000
Third	38,000	$	236,000
Fourth	35,000	$	212,000

Required:

1. Using the high-low method, estimate a cost formula for shipping expense in the form Y = a + bX.

2. In the first quarter of Year 3, the company plans to sell 29,000 units at a selling price of $54 per unit. Prepare a contribution format income statement for the quarter.

In the first quarter of Year 3, the company plans to sell 29,000 units at a selling price of $54 per unit. Prepare a contribution format income statement for the quarter. Milden Company Budgeted Contribution Format Income Statement For the First Quarter, Year 3 Sales Variable expenses: Sales commissions Shipping expense Cost of goods sold 0 0 Total variable expenses Contribution loss Fixed expenses: Advertising expense Shipping expense Administrative salaries Insurance expense Depreciation expense Total fixed expenses 0 $ CA