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

Sales (@ $3,200 per unit)				$	9,600,000
Less: Cost of goods sold					4,115,000
Gross margin					5,485,000
Less:
Selling expenses	$	1,074,000
Administrative expenses		1,100,000			2,174,000
Income				$	3,311,000

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

• Fixed portion of the cost of goods sold for the quarter amounted to $1,625,000.
• Of the selling expenses, 20% 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. Re-do and prepare the above income statement using a contribution margin approach. (Do not round intermediate calculations.)

Answer rating: 100% (QA)

1 No of Units Sold 96000003200 3000 units Cost of Goods Sold Variab... View the full answer