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. Sales in units Sales revenue MORRISEY & BROWN, ITD. Income Statements For the Four Quarters Ending December 31 Less Cost of goods sold Gross margin Less: Operating expenses Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total operating expenses Net income Quarter 1 Quarter 2 4,700 4,200 Quarter 3 Quarter 4 5,240 4,800 A$470,000 A$420,000 A$524,000 A$480,000 282,000 252,000 314,400 288,000 188,000 168,000 209,600 192,000 21,200 21,200 21,200 21,200 34,800 36,800 40,960 36,760 79,200 78,400 90,880 86,160 6,200 6,200 6,200 6,200 15,200 156,600 15,200 157,800 15,200 15,200 174,440 165,520 A$ 31,400 A$ 10,200 A$ 35,160 A$ 26,480 (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$.) Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed. Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Classification 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements. 222 Variable Cost per unit A$ A$ per unit A$ per unit 22 A$ A$ Fixed Cost 2-b. Using the high-low method, state the cost formula for each mixed expense. Y=A$ +A$ Y= A$ AS Y=A$ +A$ XXX 3. Redo the company's income statement at the 5,240-unit level of activity using the contribution format. MORRISEY & BROWN, LTD. Contribution Margin Income Statement For the Quarter Ended September 30 Sales in units Less: Variable expenses: Less: Fixed expenses: A$ A$ A$ 4. Assume that the company's sales are projected to be 4,600 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 Less: Variable expenses: Less: Fixed expenses: A$ A$ A$