operating income using the contribution margin format income statement is calcul
ID: 2499860 • Letter: O
Question
operating income using the contribution margin format income statement is calculated as:A. Revenue - variable expenses = contribution margin- fixed expenses.
B. Revenue - variable expenses = gross profit - fixed expenses.
C. Revenue - costs of goods sold = contribution margin - fixed expenses.
D. Revenue - costs of goods sold = contribution margin - operating expenses.
operating income using the contribution margin format income statement is calculated as:
A. Revenue - variable expenses = contribution margin- fixed expenses.
B. Revenue - variable expenses = gross profit - fixed expenses.
C. Revenue - costs of goods sold = contribution margin - fixed expenses.
D. Revenue - costs of goods sold = contribution margin - operating expenses.
operating income using the contribution margin format income statement is calculated as:
A. Revenue - variable expenses = contribution margin- fixed expenses.
B. Revenue - variable expenses = gross profit - fixed expenses.
C. Revenue - costs of goods sold = contribution margin - fixed expenses.
D. Revenue - costs of goods sold = contribution margin - operating expenses.
Explanation / Answer
The answer is A.Revenue - variable expenses = contribution margin- fixed expenses.
In Contribution Margin Income Statement, fixed costs are considered as period costs and is assumed to be constatnt within a given activity level. Only variable manufacturing ,selling and administrative expenses are deducted from sales revenue to arrive at contribution margin.
In traditional income statement, cost of goods sold (variable + fixed) is dedcuted from sales revenue to obtain gross profit. All other expenses (both variable and fixed) are dedcuted to arrive at net operating income.
Format of contribution margin income statement Sales xx Less:Variable Cost (xx) Contribution xx Less:Fixed Cost (xx) Net Operating Income XXRelated Questions
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