Pelotoni Dips Inc. manufactures a single product that has become very popular in the Windsor area. The income statement for the most recent three months prior to taxes are as follows:

Pelotini Dips Inc.
Income Statement
Quarterly Statement ending March 31, 2021
	Q1	Q2	Q3	Q4
Sales in Units	4,400	4,000	5,000	4,600
Sales Revenues	$440,000	$400,000	$500,000	$460,000
Less:COGS	$264,000	$240,000	$300,000	$276,000
Gross Margin	$176,000	$160,000	$200,000	$184,000
Less: Expenses
Advertising	$ 21,000	$ 21,000	$ 21,000	$ 21,000
Shipping	$ 35,000	$ 34,000	$ 38,000	$ 36,000
Salaries and Commissions	$ 83,000	$ 78,000	$ 90,000	$ 85,000
Insurance	$ 6,000	$ 6,000	$ 6,000	$ 6,000
Depreciation	$ 15,000	$ 15,000	$ 15,000	$ 15,000
Total Operating Expenses	$160,000	$154,000	$170,000	$163,000
Net Income (before taxes)	$ 16,000	$ 6,000	$ 30,000	$ 21,000

1. Using the high-low method, separate each mixed expense into variable and fixed expenses. Provide the cost formula for each mixed expense. [Hint: identify your expenses to find out the mixed expenses.] (10 marks)
2. Now redo the company's income statement at the 5,000-unit level of activity using the contribution format. (8 marks)
3. Your marketing manager sat down with the budgeting team and predicts sales to be at the 4,500 units in the next quarter. Prepare a contribution margin income statement. (8 marks)