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	8,000	8,500	9,000
Sales	$ 840,000	$ 892,500	$ 945,000
Cost of goods sold	504,000	535,500	567,000
Gross margin	336,000	357,000	378,000
Selling and administrative expenses:
Advertising expense	36,600	36,600	36,600
Shipping expense	95,000	100,200	105,400
Salaries and commissions	145,000	152,600	160,200
Insurance expense	8,850	8,850	8,850
Depreciation expense	24,400	24,400	24,400
Total selling and administrative expenses	309,850	322,650	335,450
Net operating income	$ 26,150	$ 34,350	$ 42,550

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 9,000-unit level of activity using the contribution format.