Morrisey & Brown, Limited, is the sole distributor of a product with growing sales. Its income statements for the three most recent months follow:

Morrisey & Brown, Limited

Income Statements

For the Three Months Ended September $30$

July August September

Sales in units $4,0004,5005,000$

Sales $ $400,000$ $ $450,000$ $ $500,000$

Cost of goods sold $240,000270,000300,000$

Gross margin $160,000180,000200,000$

Selling and administrative expenses:

Advertising expense $21,00021,00021,000$

Shipping expense $34,00036,00038,000$

Salaries and commissions $78,00084,00090,000$

Insurance expense $6,0006,0006,000$

Depreciation expense $15,00015,00015,000$

Total selling and administrative expenses $154,000162,000170,000$

Net operating income $ $6,000$ $ $18,000$ $ $30,000$

Required:

$1.$By analyzing data from the company's income statements, classify each of its expenses $($including cost of goods sold$)$ as either variable, fixed, or mixed.

$2.$Using the high$-$low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y $=$ a $+$ bX$.$

$3.$ Redo the company$$s income statement at the $5,000-$unit level of activity using the contribution format.