Milden Company has an exclusive franchise to purchase a productfrom the manufacturer and distribute it on the retail level. As anaid in planning, the company has decided to start using acontribution format income statement. To have data to prepare sucha statement, the company has analyzed its expenses and hasdeveloped the following cost formulas:

Cost	Cost Formula
Cost of good sold	$26 per unit sold
Advertising expense	$183,000 per quarter
Sales commissions	7% of sales
Shipping expense	?
Administrative salaries	$93,000 per quarter
Insurance expense	$10,300 per quarter
Depreciation expense	$63,000 per quarter

Management has concluded that shipping expense is a mixed cost,containing both variable and fixed cost elements. Units sold andthe related shipping expense over the last eight quartersfollow:

Quarter	Units Sold	Shipping Expense
Year 1:
First	29,000	$	173,000
Second	31,000	$	188,000
Third	36,000	$	230,000
Fourth	32,000	$	193,000
Year 2:
First	30,000	$	183,000
Second	33,000	$	198,000
Third	47,000	$	245,000
Fourth	44,000	$	221,000

Milden Company’s president would like a cost formula derived forshipping expense so that a budgeted contribution format incomestatement can be prepared for the next quarter.

2. In the first quarter of Year 3, the company plans to sell35,000 units at a selling price of $56 per unit. Prepare acontribution format income statement for the quarter. (Donot round your intermediate calculations.)

Milden Company
Budgeted Contribution Format IncomeStatement
For the First Quarter, Year 3
Sales		$1,960,000
Variable expenses:
Cost of goods sold	$910,000
Sales commissions
Shipping expense
Total variable expenses		910,000
Contribution margin		1,050,000
Fixed expenses:
Total fixed expenses		0
Net operating income		$1,050,000