Smith & Chief Ltd$.$ of Sydney, Australia, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company$$s income statements for the four most recent quarters follow:

SMITH & CHIEF LTD$.$

Income Statements

For the Four Quarters Ending December $31$

Quarter $1$ Quarter $2$ Quarter $3$ Quarter $4$

Sales in units $4,7004,2005,2404,900$

Sales revenue A$ $470,000$ A$ $420,000$ A$ $524,000$ A$ $490,000$

Less: Cost of goods sold $282,000252,000314,400294,000$

Gross margin $188,000168,000209,600196,000$

Less: Operating expenses:

Advertising expense $21,20021,20021,20021,200$

Shipping expense $34,80036,80040,96036,760$

Salaries and commissions $79,20078,40090,88086,160$

Insurance expense $6,2006,2006,2006,200$

Depreciation expense $15,20015,20015,20015,200$

Total operating expenses $156,600157,800174,440165,520$

Net income A$ $31,400$ A$ $10,200$ A$ $35,160$ A$ $30,480$

$($Note: Smith & Chief Ltd$.$s Australian$-$formatted income statement has been recast into the format common in Canada. The Australian dollar is denoted by A$$.)$

Required:

$1.$ Identify each of the company$$s expenses $($including cost of goods sold$)$ as being variable, fixed, or mixed.

$2-$a$.$ Using the high$-$low method, separate each mixed expense into variable and fixed elements.

$2-$b$.$ Using the high$-$low method, state the cost formula for each mixed expense.

$3.$ Redo the company's income statement at the $5,240-$unit level of activity using the contribution format.

$4.$ Assume that the company's sales are projected to be $4,600$ units in the next quarter. Prepare a contribution margin income statement.