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 July August September Sales in units 6, 000 6, 500 7, 000 Sales $ $ $ 570, 000 617, 500 665, 000 Cost of goods sold 342, 000 370, 500 399, 000 Gross margin 228, 000 247, 000 266, 000 Selling and administrative expenses : Advertising expense 26, 200 26, 200 26, 200 Shipping expense 58 , 000 61, 600 65, 200 Salaries and commissions 110, 000 116, 800 123, 600 Insurance expense 8, 450 8 , 450 8, 450 Depreciation expense 17, 900 17, 900 17, 900 Total selling and administrative expenses 220, 550 230, 950 241, 350 Net operating income $ 7, 450 $ 16, 050 $ 24, 650 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 company's income statement at the 7,000-unit level of activity using the contribution format