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 the cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into a 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.