When the distinction between variable and fixed costs is one of the important elements in the preparation of the income statement, the method used should be the

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The contribution margin method separates the costs into fixed and variable components and calculates the contribution margin, which is the difference between revenue and variable costs. This approach provides a clearer understanding of the profitability of the business, as it shows how much revenue is left over after covering variable costs. This information is crucial for decision-making and can also aid in determining the break-even point.

When the Distinction Between Variable and Fixed Costs Is One