The formula for a contribution format income statement is
A)Sales revenue - Step costs = Contribution margin - Fixed costs = Operating income.
B)Sales revenue - Cost of goods sold - Discretionary costs = Operating income.
C)Sales revenue - Discretionary costs = Gross profit - Committed costs = Operating income.
D)Sales revenue - Variable costs = Contribution margin - Fixed costs = Operating income.

Question

Quizplus · Accepted Answer

The formula for a contribution format income statement is Sales revenue - Variable costs = Contribution margin - Fixed costs = Operating income. This formula separates costs into variable and fixed categories, making it easier to analyze the impact of changes in sales volume on profitability. By subtracting variable costs from sales revenue, contribution margin can be calculated, which is the amount of revenue available to cover fixed costs and generate operating income.

The Formula for a Contribution Format Income Statement Is