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		4,500				5,000				5,500
Sales	$	495,000			$	550,000			$	605,000
Cost of goods sold		297,000				330,000				363,000
Gross margin		198,000				220,000				242,000
Selling and administrative expenses:
Advertising expense		30,600				30,600				30,600
Shipping expense		35,000				37,400				39,800
Salaries and commissions		80,000				86,200				92,400
Insurance expense		9,950				9,950				9,950
Depreciation expense		21,800				21,800				21,800
Total selling and administrative expenses		177,350				185,950				194,550
Net operating income	$	20,650			$	34,050			$	47,450

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 5,500-unit level of activity using the contribution format.