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Describe the three capacity strategies and the advantages of each.
Variable Selling Expense
Variable selling expense refers to costs that fluctuate with the volume of sales, such as commissions and shipping charges.
Traditional Format Income Statement
A financial statement format that separates operating activities from non-operating activities to reveal gross profit, operating income, and net income.
Contribution Format Income Statement
An income statement format that separates variable and fixed costs, making it easier to see the contribution margin.
Contribution Margin
The revenue remaining after deducting variable costs, which contributes to covering fixed costs and generating profit.
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