The contribution approach to the income statement offers several benefits to decision makers.Which of the following is NOT a benefit of this approach?
A) This approach makes it easier to understand the impact of changes in sales volume on operating income.
B) This approach stresses the role of fixed costs in operating income.
C) This approach is used with CVP analysis.
D) This approach is accepted by U.S. Generally Accepted Accounting Principles.

Question

Quizplus · Accepted Answer

The contribution approach is not accepted or required by U.S. Generally Accepted Accounting Principles (GAAP), which requires the traditional format income statement that separates costs by function (e.g., cost of goods sold, selling and administrative expenses). However, the contribution approach is still useful for internal decision making and planning purposes. A, B, and C are all benefits of using the contribution approach.

The Contribution Approach to the Income Statement Offers Several Benefits