Gallop Corporation prepared the following report for the first quarter of this year: Gallop?s controller, Nancy Johnstone,

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Gallop Corporation prepared the following report for the first quarter of this year:

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Gallop?s controller, Nancy Johnstone, studied the costs in detail, particularly focusing on cost behaviour. Her analysis revealed the following:

? Sixty-five percent of the cost of goods sold was variable with respect to the number of units.

? Of the selling expenses, $800,000 was fixed; the remaining was variable with respect to the number of units.

? All of the administrative expenses were fixed.

Required:

1. Express the cost of goods sold and the selling expenses in terms of cost equations.

2. Redo the above income statement using a contribution margin approach.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  book-img-for-question

Introduction to Managerial Accounting

ISBN: 978-1259105708

5th Canadian edition

Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan

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