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 5,900 5,400 Quarter 4 Quarter 3 6,680 Sales in units 6,000 A$590,000 $540,000 354,000 324,000 236,000 216,000 A$668,000 A$600,000 400,800 360,000 267,200 240,000 Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total operating expenses 22,400 22,400 39,600 41,600 86,400 80,800 7,400 7,400 16,400 16,400 172,200 168,600 A$ 63,800 A$ 47,400 22,400 46,720 96,160 7,400 16,400 189,080 22,400 41,320 93,120 7,400 16,400 180,640 A$ 59,360 Net income A$ 78,120 (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$.) Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed. Expenses Classification Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements. Variable Cost Fixed Cost A$ 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$ Y= A$ + A$ XXX Y= A$ + A$ 3. Redo the company's income statement at the 6,680-unit level of activity using the contribution format. MORRISEY & BROWN, LTD. Contribution Margin Income Statement For the Quarter Ended September 30 Sales in units AS Less: Variable expenses A$ Less: Fixed expenses A$ 4. Assume that the company's sales are projected to be 5,200 units in the next quarter. Prepare a contribution margin income statement. MORRISEY & BROWN, LTD. Contribution Margin Projected Income Statement For the Quarter Ended March 31 Sales in units A$ Less: Variable expenses A$ Less: Fixed expenses A$