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Morrisey & Brown, Ltd., of Sydney, Australia, is a merchandising firm that is the sole distributor...

Morrisey & Brown, Ltd., of Sydney, Australia, is a merchandising firm 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 Four Quarters Ending December 31
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Sales in units 5,100 4,600 5,720 5,200
Sales revenue A$ 510,000 A$ 460,000 A$ 572,000 A$ 520,000
Less: Cost of goods sold 306,000 276,000 343,200 312,000
Gross margin 204,000 184,000 228,800 208,000
Less: Operating expenses:
Advertising expense 21,600 21,600 21,600 21,600
Shipping expense 36,400 38,400 42,880 38,280
Salaries and commissions 81,600 79,200 92,640 88,480
Insurance expense 6,600 6,600 6,600 6,600
Depreciation expense 15,600 15,600 15,600 15,600
Total operating expenses 161,800 161,400 179,320 170,560
Net income A$ 42,200 A$ 22,600 A$ 49,480 A$ 37,440

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

2-a. Using the high-low method, separate each mixed expense into variable and fixed elements.

Variable Cost Fixed Cost
A$ per unit A$   
A$ per unit A$
A$ per unit A$

2-b. Using the high-low method, state the cost formula for each mixed expense.

   Y= A$ + A$    X
Y= A$ + A$ X
Y= A$ + A$ X

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