Which of the following is an important difference between a gross margin income statement and a contribution margin income statement?
A) The gross margin income statement shows details of fixed and variable costs, while a contribution margin income statement does not.
B) The contribution margin shows direct production costs, while a gross margin income statement does not.
C) A contribution margin income statement is more likely to be presented in a set of a company's external financial statements than a gross margin income statement.
D) The contribution margin income statement shows details of fixed and variable costs, while a gross margin income statement does not.

Question

Quizplus · Accepted Answer

The contribution margin income statement shows details of variable costs and contribution margin to overall profit. It is not intended to be an all- encompassing measure of a company's profitability. However, the contribution margin can be used to examine variable production costs, to evaluate the profitability of an item, and to calculate how to improve its profitability. A gross margin income statement shows the deduction of total product costs, or cost of goods sold, from revenue and does not necessarily show the details of variable costs or the contribution to profit of each additional dollar of sales revenue as does as contribution margin income statement.

Which of the Following Is an Important Difference Between a Gross