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 companys 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		5,200			4,700			5,840			5,300
Sales revenue	A$	520,000		A$	470,000		A$	584,000		A$	530,000
Less: Cost of goods sold		312,000			282,000			350,400			318,000
Gross margin		208,000			188,000			233,600			212,000
Less: Operating expenses:
Advertising expense		21,700			21,700			21,700			21,700
Shipping expense		36,800			38,800			43,360			38,660
Salaries and commissions		82,200			79,400			93,080			89,060
Insurance expense		6,700			6,700			6,700			6,700
Depreciation expense		15,700			15,700			15,700			15,700
Total operating expenses		163,100			162,300			180,540			171,820
Net income	A$	44,900		A$	25,700		A$	53,060		A$	40,180

(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 companys expenses (including cost of goods sold) as being variable, fixed, or mixed.

2-a. Using the high-low method, separate each mixed expense into variable and fixed elements.

2-b. Using the high-low method, state the cost formula for each mixed expense.

3. Redo the company's income statement at the 5,840-unit level of activity using the contribution format.

4. Assume that the companys sales are projected to be 4,850 units in the next quarter. Prepare a contribution margin income statement.