A company's sales and production levels are the same.The amount of income presented on a contribution margin format income statement
A)will always be greater than that shown on a traditional GAAP income statement.
B)will always be less than that shown on a traditional GAAP income statement.
C)will always be the same as that shown on a traditional GAAP income statement.
D)will not differ from that shown on a traditional GAAP income statement regardless of the level of production and sales.

Question

Quizplus · Accepted Answer

Contribution margin format and traditional GAAP income statement both present the same amount of income when sales and production levels are the same. The only difference is in the format of the presentation, where contribution margin format separates variable costs from fixed costs, making it easier to analyze the contribution margin ratio and make decisions about pricing and sales mix. However, the total amount of income is the same in both formats. Therefore, the answer is C - will always be the same as that shown on a traditional GAAP income statement.

A Company's Sales and Production Levels Are the Same