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Morrisey & Brown, Limited, 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, Limited Income Statements For the Three Months Ended September 30 July August September Sales in units 7,250 7,750 8,250 Sales $ 652,500 $ 697,500 $ 742,500 Cost of goods sold 391,500 418,500 445,500 Gross margin 261,000 279,000 297,000 Selling and administrative expenses: Advertising expense 22,000 22,000 22,000 Shipping expense 78,500 83,100 87,700 Salaries and commissions 130,000 137,300 144,600 Insurance expense 9,250 9,250 9,250 Depreciation expense 15,000 15,000 15,000 Total selling and administrative expenses 254,750 266,650 278,550 Net operating income $ 6,250 $ 12,350 $ 18,450 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 8,250-unit level of activity using the contribution format.

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