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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 companys income statements for the three most recent months follow:

Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30
July August September
Sales in units 7,750 8,250 8,750
Sales $ 775,000 $ 825,000 $ 875,000
Cost of goods sold 465,000 495,000 525,000
Gross margin 310,000 330,000 350,000
Selling and administrative expenses:
Advertising expense 28,200 28,200 28,200
Shipping expense 89,500 94,500 99,500
Salaries and commissions 140,000 147,500 155,000
Insurance expense 7,200 7,200 7,200
Depreciation expense 21,600 21,600 21,600
Total selling and administrative expenses 286,500 299,000 311,500
Net operating income $ 23,500 $ 31,000 $ 38,500

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.

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. (Round the Variable cost per unit to 1 decimal place.)

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