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		6,250				6,750				7,250
Sales	$	656,250			$	708,750			$	761,250
Cost of goods sold		393,750				425,250				456,750
Gross margin		262,500				283,500				304,500
Selling and administrative expenses:
Advertising expense		36,600				36,600				36,600
Shipping expense		62,500				66,300				70,100
Salaries and commissions		115,000				121,900				128,800
Insurance expense		9,100				9,100				9,100
Depreciation expense		16,900				16,900				16,900
Total selling and administrative expenses		240,100				250,800				261,500
Net operating income	$	22,400			$	32,700			$	43,000

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 companys income statement at the 7,250-unit level of activity using the contribution format.