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	7,500	8,000	8,500
Sales	$ 712,500	$ 760,000	$ 807,500
Cost of goods sold	427,500	456,000	484,500
Gross margin	285,000	304,000	323,000
Selling and administrative expenses:
Advertising expense	39,600	39,600	39,600
Shipping expense	81,000	85,800	90,600
Salaries and commissions	135,000	142,400	149,800
Insurance expense	6,100	6,100	6,100
Depreciation expense	19,300	19,300	19,300
Total selling and administrative expenses	281,000	293,200	305,400
Net operating income	$ 4,000	$ 10,800	$ 17,600

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 8,500-unit level of activity using the contribution format.