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		5,250				5,750				6,250
Sales	$	630,000			$	690,000			$	750,000
Cost of goods sold		378,000				414,000				450,000
Gross margin		252,000				276,000				300,000
Selling and administrative expenses:
Advertising expense		30,600				30,600				30,600
Shipping expense		46,500				49,500				52,500
Salaries and commissions		93,000				99,500				106,000
Insurance expense		10,200				10,200				10,200
Depreciation expense		21,300				21,300				21,300
Total selling and administrative expenses		201,600				211,100				220,600
Net operating income	$	50,400			$	64,900			$	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 companys income statement at the 6,250-unit level of activity using the contribution format.