A contribution margin format income statement
A)is based on cost function rather than on cost behavior.
B)allows managers to assess the impact of sales volume on operating income.
C)is acceptable for GAAP reporting.
D)classifies costs as committed or discretionary.

Question

Quizplus · Accepted Answer

A contribution margin format income statement separates costs into fixed and variable categories to calculate the contribution margin and operating income, allowing managers to easily see the impact of changes in sales volume on operating income. This format is useful for internal decision-making but is not acceptable for GAAP reporting. The classification of costs as committed or discretionary is not a factor in this format.

A Contribution Margin Format Income Statement