Problem 2-16 Cost Behavior, High-Low Method: Contribution Format Income Statement LO2-4, L02-5, LO2-6] 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: Morrissey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July August September Sales in units 4.000 4.500 5.000 $450,000 Sales $400,000 $500,000 300,000 270,000 Cost of goods sold 240,000 160,000 Gross margin 180,000 200,000 Selling and administrative expenses Advertising expense 21,000 21,000 21,000 Shipping expense 34,000 36.000 38.000 Salaries and commissions 78,000 84,000 90,000 Insurance expense 6.000 6,000 6,000 Depreciation expense 15,000 15,000 15,000 170,000 Total selling and administrative expenses 154.000 162,000 Net operating income 6,000 18,000 30,000