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 6,750 7,250 7,750 Sales $ 742,500 $ 797,500 $ 852,500 Cost of goods sold 445,500 478,500 511,500 Gross margin 297,000 319,000 341,000 Selling and administrative expenses: Advertising expense 33,800 33,800 33,800 Shipping expense 69,500 73,700 77,900 Salaries and commissions 125,000 132,100 139,200 Insurance expense 9,900 9,900 9,900 Depreciation expense 22,100 22,100 22,100 Total selling and administrative expenses 260,300 271,600 282,900 Net operating income $ 36,700 $ 47,400 $ 58,100 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 7,750-unit level of activity using the contribution format.