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:

(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 5,000-unit level of activity using the contribution format.

MORRISEY & BROWN, LTD. Income Statements For the Three Months Ending September 30 July 4,000 August 4,500 September 5,000 Sales in units Sales revenue A$ 400,000 240,000 A$ 450,000 270,000 A$ 500,000 300,000 Less: Cost of goods sold Gross margin 160,000 180,000 200,000 Less: Operating expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 21,000 38,000 90,000 6,000 15,000 21,000 34,000 78,000 6,000 15,000 21,000 36,000 84,000 6,000 15,000 Total operating expenses 154,000 162,000 170,000 Net income A$ 6,000 A$ 18,000 A$ 30,000 Expenses Classification Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Variable Cost Fixed Cost AS per unit A$ A$ per unit A$ per unit A$ A$ A$ Y=A$ X YA$ A$ + X A$ YA$ + MORRISEY & BROWN, LTD. Income Statement For the Month Ended September 30 Sales in units 5,000 A$ Less: Variable expenses: A$ 120,000 Less: Fixed expenses A$