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	4,750	5,250	5,750
Sales	$ 546,250	$ 603,750	$ 661,250
Cost of goods sold	327,750	362,250	396,750
Gross margin	218,500	241,500	264,500
Selling and administrative expenses:
Advertising expense	31,800	31,800	31,800
Shipping expense	35,500	38,100	40,700
Salaries and commissions	81,000	87,300	93,600
Insurance expense	6,550	6,550	6,550
Depreciation expense	18,000	18,000	18,000
Total selling and administrative expenses	172,850	181,750	190,650
Net operating income	$ 45,650	$ 59,750	$ 73,850

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 5,750-unit level of activity using the contribution format.

Expenses	Classification
Cost of goods sold
Advertising expense
Shipping expense
Salaries and commissions
Insurance expense
Depreciation expense

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. (Round the Variable cost per unit to 1 decimal place.)

	Variable Cost		Fixed Cost	Formula
		per unit		Y =		+		X
		per unit		Y =		+		X