Okanagan Mountain Equipment Co. manufactures carabiner clips for mountain climbing. The company's income statements for the last two years are given below:

	2020	2021
Units sold	90,000	82,500
Sales	$ 1,500,000	$ 1,375,000
Cost of goods sold	537,000	492,250
Gross margin	963,000	882,750
Selling expenses	225,000	211,000
Administrative expenses	75,000	75,000
Net income	663,000	596,750

The company has no beginning or ending inventories.

Required:

a. Use the high-low method to determine the cost formula for the selling expenses, which are a mixed cost. (5 marks)

b. The company expects to sell 111,000 units next year. Prepare the budgeted income statement using the contribution format for this level of activity. No heading required. (7 marks)