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Morrisey & Brown, Ltd., of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among
Morrisey & Brown, Ltd., of Sydney, Australia, is a merchandising firm 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, LTD. Income Statements For the Four Quarters Ending December 31 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Sales in units 5,600 5, 100 6,320 5,700 Sales revenue A$560,000 A$510,000 A$632,000 A$570,000 Less: Cost of goods sold 336,000 306,000 379,200 342,000 Gross margin 224,000 204,000 252,800 228,000 Less: Operating expenses: Advertising expense 22,100 22,100 22,100 22,100 Shipping expense 38,400 40,400 45, 280 40, 180 Salaries and commissions 84,600 80,200 94,840 91,380 Insurance expense 7,100 7,100 7,100 7,100 Depreciation expense 16,100 16,100 16,100 16,100 Total operating expenses 168,300 165,900 185,420 176,860 Net income A$ 55,700 A$ 38, 100 A$ 67,380 A$ 51, 140 (Note: Morrisey & Brown, Ltd.'s Australian-formatted income statement has been recast into the format common in Canada. The Australian dollar is denoted by A$.) Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed. Classification Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements. Variable Cost Fixed Cost A$ per unit A$ A$ per unit A$ A$ per unit A$ 2-b. Using the high-low method, state the cost formula for each mixed expense. Y= A$ + A$ x Y= A$ + A$ X Y= A$ + A$ X
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