Milden Company is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas:

Cost ____________________________________________ Cost Formula

Cost of good sold .............................................. $35 per unit sold

Advertising expense ....................................... $210,000 per quarter

Sales commissions .................................................... 6% of sales

Shipping expense ..................................................................?

Administrative salaries ................................... $145,000 per quarter

Insurance expense ............................................ $9,000 per quarter

Depreciation expense ....................................... $76,000 per quarter

Because shipping expense is a mixed cost, the company needs to estimate the variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data:

Required:
1. Using the high-low method, estimate a cost formula for shipping expense in the form Y = a + bX.
2. In the first quarter of Year 3, the company plans to sell 12,000 units at a selling price of $100 per unit. Prepare a contribution format income statement for the quarter.

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Units Shipping Sold Expense Quarter Year 1 First 16,000 $175,000 18,000 $190,000 Year 2: First 11,000 $130,000 17,000 $185,000 13,000 14/JX)()