Morrisey & Brown, Limited, of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The companys 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	6,250	6,750	7,250
Sales	$ 656,250	$ 708,750	$ 761,250
Cost of goods sold	393,750	425,250	456,750
Gross margin	262,500	283,500	304,500
Selling and administrative expenses:
Advertising expense	36,600	36,600	36,600
Shipping expense	62,500	66,300	70,100
Salaries and commissions	115,000	121,900	128,800
Insurance expense	9,100	9,100	9,100
Depreciation expense	16,900	16,900	16,900
Total selling and administrative expenses	240,100	250,800	261,500
Net operating income	$ 22,400	$ 32,700	$ 43,000

Required:

1. By analyzing the 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 companys income statement at the 7,250-unit level of activity using the contribution format.