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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		6,750				7,250				7,750
Sales	$	742,500			$	797,500			$	852,500
Cost of goods sold		445,500				478,500				511,500
Gross margin		297,000				319,000				341,000
Selling and administrative expenses:
Advertising expense		33,800				33,800				33,800
Shipping expense		69,500				73,700				77,900
Salaries and commissions		125,000				132,100				139,200
Insurance expense		9,900				9,900				9,900
Depreciation expense		22,100				22,100				22,100
Total selling and administrative expenses		260,300				271,600				282,900
Net operating income	$	36,700			$	47,400			$	58,100

Required:

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 companys income statement at the 7,750-unit level of activity using the contribution format.

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