Morrisey & Brown, Ltd., of Sydney is a merchandising company 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 Three Months Ended September 30
		July				August			September
Sales in units		4,000				4,500			5,000
Sales		$400,000				$450,000			$500,000
Cost of goods sold		240,000				270,000			300,000
Gross margin		160,000				180,000			200,000
Selling and administrative expenses:
Advertising expense		21,000				21,000			21,000
Shipping expense		34,000				36,000			38,000
Salaries and commissions		78,000				84,000			90,000
Insurance expense		6,000				6,000			6,000
Depreciation expense		15,000				15,000			15,000
Total selling and administrative expenses		154,000				162,000			170,000
Net operating income		$ 6,000				$ 18,000			$ 30,000
Required: 1. Identify each of the companys expenses (including cost of goods sold) as either variable, fixed, or mixed. Expenses Classification Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. Variable Cost Fixed Cost Formula per unit Y = + per unit per unit Y = + per unit

3.	Redo the companys income statement at the 5,000-unit level of activity using the contribution format. Morrisey & Brown, Ltd. Income Statement For the Month Ended September 30 Variable expenses: Fixed expenses: