The amount of income presented on a contribution 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)May or may not differ from that shown on a traditional GAAP income statement depending on the level of production and sales.

Question

Quizplus · Accepted Answer

The amount of income presented on a contribution format income statement may or may not differ from that shown on a traditional GAAP income statement depending on the level of production and sales. This is because contribution format income statements separate costs into fixed and variable categories, allowing for a clearer picture of the contribution margin (revenue minus variable costs) and the break-even point. In contrast, GAAP income statements do not distinguish between fixed and variable costs, resulting in a different presentation of income depending on production and sales levels.

The Amount of Income Presented on a Contribution Format Income