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Morrisey & Brown, Limited, of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among
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 company's income statements for the three most recent months follow: Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 Sales in units. Sales Cost of goods sold Gross margin Selling and administrative expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling and administrative expenses Net operating income July 5,000 August 5,500 $ 625,000 $ 687,500 375,000 250,000 412,500 275,000 September 6,000 $750,000 450,000 300,000 22,800 22,800 22,800 46,000 48,800 51,600 92,000 98,400 104,800 6,050 6,050 6,050 24,700 191,550 $ 58,450 $ 74,250 24,700 200,750 24,700 209,950 $ 90,050 Required 1 Required 2 Required 3 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. Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Classification Required 1 Required 2 > Required 1 Required 2 Required 31 Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions the form Y a + bx. (Round the Variable cost per unit to 2 decimal places.) Variable Cost Fixed Cost per unit Y = per unit Y = Formula X X Redo the company's income statement at the 6,000-unit level of activity using the contribution format. Variable expenses: Morrisey & Brown, Limited Income Statement For the Month Ended September 30 Fixed expenses:
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