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. MORRISKY E BROW, LTD Income Statements For the Four Quarters inding December 31 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Sales in units 4.600 4,100 5,120 4,700 Sales revence A$ 460,000 A$410,000 $512,000 A$ 470,000 Less Cost of goods sold 276.000 246,000 307,200 282,000 Gross margin 184,000 266,000 204,800 188,000 Less Operating expenses Advertising expense 21,100 21,100 21,100 21,100 Shipping expense 34.400 36,400 40,480 36,380 Salaries and commissions 78.600 78,200 90,440 85,580 Insurance expense 6.100 6,100 6,100 6,100 Depreciation expense 15,100 15,100 15,100 15.100 Total operating expenses 155,300 256.900 173,220 164,260 Net income A$ 28,700 A$ 7,100 A$ 31,580 A23,740 (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 Variable Fixed Mixed Mixed Fixed Fixed 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements Variable Cost 6 per unit 12 per unit 222 Fixed Cost AS 9.750 AS 29.000 Shipping expense Salaries and commissions expense 212 AS per unit 2-b. Using the high-low method, state the cost formula for each mixed expense, Shipping expense Salaries and commissions expense Y= AS YAS YAS 9,760 + AS 29,000 AS +AS 6 xl 12 x 3. Redo the company's income statement at the 5,120-unit level of activity using the contribution format. MORRISEY & BROWN, LTD. Contribution Margin Income Statement For the Quarter Ended September 30 Sales in units Sales revenue AS Less: Variable expenses Cost of goods sold 307,200 Shipping expense 30,720 Salaries and commissions expense 61,440 5,120 512,000 AS 399,360 112,640 Contribution margin Less: Foxed expenses Advertising expense Shipping expense Depreciation expense Insurance expense Salaries and commissions expense 21,100 40,480 15,100 6,100 61,4401 144,220 (31.580) Net Income AS 4. Assume that the company's sales are projected to be 4,550 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 Sales revenue Less: Variable expenses Cost of goods sold AS 273,000 Shipping expense 27.300 Salaries and commissions expense 54,600 4,550 455,000 AS 2 354,000 100,100 Contribution margin Less: Fored expenses Advertising expense Shipping expense Salaries and commissions expense Insurance expense Depreciation expense 21,100 27,300 54,600 6.100 15,100 124,200 (24,100) Net Income AS
