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Morrisey & Brown, 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 companys income statements for the three most recent months follow:

MORRISEY & BROWN, LTD. Income Statements
For the Four Quarters Ending December 31
	Quarter 1			Quarter 2			Quarter 3			Quarter 4
Sales in units		4,800			4,300			5,360			4,900
Sales revenue	A$	480,000		A$	430,000		A$	536,000		A$	490,000
Less: Cost of goods sold		288,000			258,000			321,600			294,000
Gross margin		192,000			172,000			214,400			196,000
Less: Operating expenses:
Advertising expense		21,300			21,300			21,300			21,300
Shipping expense		35,200			37,200			41,440			37,140
Salaries and commissions		79,800			78,600			91,320			86,740
Insurance expense		6,300			6,300			6,300			6,300
Depreciation expense		15,300			15,300			15,300			15,300
Total operating expenses		157,900			158,700			175,660			166,780
Net income	A$	34,100		A$	13,300		A$	38,740		A$	29,220

(Note: Morrisey & Brown, 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 companys 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 5,360-unit level of activity using the contribution format.

4. Assume that the companys sales are projected to be 4,650 units in the next quarter. Prepare a contribution margin income statement.

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