Fixed indirect production costs affect the calculation of ________ on the absorption income statement.Fixed indirect production costs do NOT affect the calculation of ________ on the contribution income statement.
A) contribution margin; gross margin
B) gross margin; contribution margin
C) operating income; gross margin
D) contribution margin; operating income

Question

Quizplus · Accepted Answer

Fixed indirect production costs are included in the calculation of gross margin on the absorption income statement, which takes into account all manufacturing costs (both variable and fixed). However, on the contribution income statement, only variable costs are included in the calculation of contribution margin. Therefore, fixed indirect production costs do not affect the calculation of contribution margin on the contribution income statement.

Fixed Indirect Production Costs Affect the Calculation of ________ on the Absorption