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	7,000	7,500	8,000
Sales	$ 735,000	$ 787,500	$ 840,000
Cost of goods sold	441,000	472,500	504,000
Gross margin	294,000	315,000	336,000
Selling and administrative expenses:
Advertising expense	36,400	36,400	36,400
Shipping expense	75,000	79,400	83,800
Salaries and commissions	120,000	127,200	134,400
Insurance expense	8,400	8,400	8,400
Depreciation expense	22,800	22,800	22,800
Total selling and administrative expenses	262,600	274,200	285,800
Net operating income	$ 31,400	$ 40,800	$ 50,200

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 8,000-unit level of activity using the contribution format.