Asked by Vaden Mangler on Jul 13, 2024
Verified
A contribution format income statement separates costs into fixed and variable categories, first deducting variable expenses from sales to obtain the contribution margin.
Contribution Margin
The amount by which sales revenue exceeds variable costs; it contributes to covering fixed costs and generating profit.
Variable Categories
Classes or groups of variables in statistics or data analysis that can take on different values and are used to categorize or differentiate data points.
- Acquire an understanding of the variation and value of the contribution margin in the context of cost-volume-profit analysis.
- Highlight the variances between conventional income statements and contribution format income statements.
Verified Answer
TS
Tauzhanee SpannJul 14, 2024
Final Answer :
True
Explanation :
The statement correctly describes the structure and purpose of a contribution format income statement, where variable costs are deducted from sales to obtain the contribution margin before deducting fixed costs to determine the net income.
Learning Objectives
- Acquire an understanding of the variation and value of the contribution margin in the context of cost-volume-profit analysis.
- Highlight the variances between conventional income statements and contribution format income statements.
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