Problem 5A-7 (Static) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO5- 10] Morrisey & Brown, Limited, of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow: Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 Sales in units Sales Cost of goods sold Gross margin Selling and administrative expenses Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling and administrative expenses Net operating income Required: July 4,000 August 4,500 September 5,000 $ 400,000 240,000 160,000 $ 450,000 270,000 180,000 $ 500,000 300,000 200,000 21,000 21,000 21,000 34,000 36,000 38,000 78,000 84,000 90,000 6,000 6,000 6,000 15,000 15,000 15,000 154,000 162,000 170,000 $ 6,000 $ 18,000 $ 30,000 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 company's income statement at the 5,000-unit level of activity using the contribution format.