question archive Gallop Corporation prepared the following report for the first quarter of this year: Sales (2,600 units @ $2,800 per unit) $ 7,280,000 Less: Cost of goods sold 3,242,000 Gross margin 4,038,000 Less: Selling expenses $ 1,049,000 Administrative expenses 1,050,000 2,099,000 Income $ 1,939,000 Gallop’s controller, Nancy Johnstone, studied the costs in detail, particularly focusing on cost behaviour
Gallop Corporation prepared the following report for the first quarter of this year: Sales (2,600 units @ $2,800 per unit) $ 7,280,000 Less: Cost of goods sold 3,242,000 Gross margin 4,038,000 Less: Selling expenses $ 1,049,000 Administrative expenses 1,050,000 2,099,000 Income $ 1,939,000 Gallop’s controller, Nancy Johnstone, studied the costs in detail, particularly focusing on cost behaviour
Subject:MathPrice: Bought3
Gallop Corporation prepared the following report for the first quarter of this year:
|
Sales (2,600 units @ $2,800 per unit) |
$ |
7,280,000 |
||
|
Less: Cost of goods sold |
3,242,000 |
|||
|
Gross margin |
4,038,000 |
|||
|
Less: |
||||
|
Selling expenses |
$ |
1,049,000 |
||
|
Administrative expenses |
1,050,000 |
2,099,000 |
||
|
Income |
$ |
1,939,000 |
||
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, $750,000 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. (Round the "Variable cost" to 2 decimal places.)
2. Redo the above income statement using a contribution margin approach.
