In order to prepare a contribution format income statement,costs must be separated into:
A) manufacturing and selling, general, and administrative costs.
B) cost of goods sold and operating expenses.
C) variable and fixed costs.
D) mixed, variable and fixed costs.

Question

Quizplus · Accepted Answer

In order to prepare a contribution format income statement, costs must be separated into variable and fixed costs. This is because the contribution format income statement focuses on the contribution margin, which is the difference between sales revenue and variable costs. The fixed costs are deducted separately from the contribution margin to determine the net income. Separating the costs into manufacturing and selling, general, and administrative costs or cost of goods sold and operating expenses would not provide the necessary information for a contribution format income statement. Mixed costs can be separated into variable and fixed components for purposes of the income statement, so they would fall under the variable and fixed cost categories.

In Order to Prepare a Contribution Format Income Statement,costs Must