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		6,500			6,000			7,400			6,600
Sales revenue	A$	650,000		A$	600,000		A$	740,000		A$	660,000
Less: Cost of goods sold		390,000			360,000			444,000			396,000
Gross margin		260,000			240,000			296,000			264,000
Less: Operating expenses:
Advertising expense		23,000			23,000			23,000			23,000
Shipping expense		42,000			44,000			49,600			43,600
Salaries and commissions		90,000			82,000			98,800			96,600
Insurance expense		8,000			8,000			8,000			8,000
Depreciation expense		17,000			17,000			17,000			17,000
Total operating expenses		180,000			174,000			196,400			188,200
Net income	A$	80,000		A$	66,000		A$	99,600		A$	75,800

(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 7,400-unit level of activity using the contribution format.

4. Assume that the companys sales are projected to be 5,500 units in the next quarter. Prepare a contribution margin income statement.