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Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian
Morrisey & Brown, Ltd., of Sydney is a merchandising company 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: August 5,750 $ 690,000 414,000 276,000 September 6,250 $ 750,000 450,000 300,000 Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July Sales in units 5, 250 Sales $ 630,000 Cost of goods sold 378,000 Gross margin 252,000 Selling and administrative expenses: Advertising expense 30, 600 Shipping expense 46,500 Salaries and commissions 93,000 Insurance expense 10,200 Depreciation expense 21,300 Total selling and administrative expenses 201,600 Net operating income $ 50,400 30, 600 49,500 99,500 10,200 21,300 211,100 $ 64,900 30, 600 52,500 106,000 10, 200 21,300 220,600 $ 79,400 Required: 1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y= a + bx. 3. Redo the company's income statement at the 6,250-unit level of activity using the contribution format. Complete this question by entering your answers in the tabs below
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