Reference no: EM131809887

Problem - 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 company's 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	1,700	3,000	4,500
Sales revenue	A$ 306,000	A$ 540,000	A$ 810,000
Cost of goods sold	112,200	198,000	297,000
Gross margin	193,800	342,000	513,000
Selling and administrative expenses:
Advertising expense	70,900	70,900	70,900
Shipping expense	38,500	52,800	69,300
Salaries and commissions	98,600	146,700	202,200
Insurance expense	9,900	9,900	9,900
Depreciation expense	43,000	43,000	43,000
Total selling and administrative expenses	260,900	323,300	395,300
Net operating income (loss)	A$ (67,100	A$ 18,700	A$ 117,700

(Note: Morrisey & Brown, Ltd.'s Australian-formatted income statement has been recast in the format common in the United States. The Australian dollar is denoted here by A$.)

Requirement 1: (a) Using the high-low method, separate each mixed expense into variable and fixed elements.

(b) State the cost formula for each mixed expense. (X represents sales in units).

Requirement 2: Redo the company's income statement at the 4,500-unit level of activity using the contribution format.