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: Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July August 4,000 4,500 Sales in units September 5,000 Sales Cost of goods sold $400,000 240,000 $450,000 270,000 $500,000 300,000 Gross margin 160,000 180,000 200,000 Selling and administrative expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 21,000 34,000 78,000 6,000 15,000 21,000 36,000 84,000 6,000 15,000 21,000 38,000 90,000 6,000 15,000 Total selling and administrative expenses 154,000 162,000 170,000 Net operating income $ 6,000 $ 18,000 $ 30,000 Required: 1. Identify each of the company's expenses (including cost of goods sold) as either variable, fixed, or mixed. Expenses Cost of goods sold Advertising expense Shipping expense Salaries and commissions Classification Variable Fixed Mixed Mixed Fixed Insurance expense Depreciation expense Fixed 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. Variable Cost Fixed Cost Formula Salaries and commissions Y = + per unit per unit per unit per unit Y = + 3. Redo the company's income statement at the 5,000-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Sales Variable expenses: Cost of goods sold Shipping expense Salaries and commissions expense 0 Fixed expenses: Insurance expense Depreciation expense Advertising expense Salaries and commissions expense 0 Net operating income