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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 company's 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 5,500 5,000 6,200 5,600 Sales revenue A$550,000 A$500,000 A$620,000 A$560,000 Less: Cost of goods sold 330,000 300,000 372,000 336,000 Gross margin 220,000 200,000 248,000 224,000 Less: Operating expenses: Advertising expense 22,000 22,000 22,000 22,000 Shipping expense 38,000 40,000 44,800 39,800 Salaries and commissions 84,000 80,000 94,400 90,800 Insurance expense 7,000 7,000 7,000 7,000 Depreciation expense 16,000 16,000 16,000 16,000 Total operating expenses 167,000 165,000 184,200 175,600 Net income A$ 53,000 A$ 35,000 A$ 63,800 A$ 48,400 (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$.) Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed. Classification Submit Gross margin 220,000 200,000 248,000 224,000 Less: Operating expenses: Advertising expense 22,000 22,000 22,000 22,000 Shipping expense 38,000 40,000 44,800 39,800 Salaries and commissions 84,000 80,000 94,400 90,800 Insurance expense 7,000 7,000 7,000 Depreciation expense 7,000 16,000 16,000 Total operating expenses 16,000 16,000 167,000 165,000 175,600 184, 200 A$ 63,800 Net income A$ 53,000 A$ 35,000 A$ 48,400 (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$.) Required: 1. Identify each of the company's expenses (including cost of goods sold) as being variable, fixed, or mixed. Expenses Classification Cost of goods sold Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense 2-a. Using the high-low method, separate each mixed expense into variable and fixed elements. Variable Cost Fixed Cost A$ A$ per unit per unit 36 A$ A$ AS per unit A$ 2-b. Using the high-low method, state the cost formula for each mixed expense. + A$ X Y= A$ Y= A$ + A$ Y= A$. + A$ Prev 4 of 4 585 XX Next ************* 3. Redo the company's income statement at the 6,200-unit level of activity using the contribution format. MORRISEY & BROWN, LTD. B Contribution Margin Income Statement For the Quarter Ended September 30 Sales in units Less: Variable expenses: A$ Less: Fixed expenses: A$ A$ 0 0 0 0 4 4. Assume that the company's sales are projected to be 5,000 units in the next quarter. Prepare a contribution margin income statement. MORRISEY & BROWN, LTD. Contribution Margin Projected Income Statement For the Quarter Ended March 31 A$ A$ Sales in units Less: Variable expenses: Less: Fixed expenses: A$ --- 0 0 0 0

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