Problem 6A-7 (Algo) Cost Behavior; High-Low Method; Contribution Format Income Statement [LO6-10] 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 company's income statements for the three most recent months follow: Sales in units Sales Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 Cost of goods sold Gross margin Selling and administrative expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling and administrative expenses Net operating income Required: July 6,500 August 7,000 September 7,500 $ 650,000 390,000 260,000 $ 700,000 420,000 280,000 $ 750,000 450,000 300,000 25,800 25,800 25,800 69,000 73,000 77,000 118,000 125,000 132,000 9,750 9,750 9,750 16,400 238,950 16,400 249,950 16,400 260,950 $ 21,050 $ 30,050 $ 39,050 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 company's income statement at the 7,500-unit level of activity using the contribution format.