Both the traditional income statement approach and the contribution margin approach will yield the same answer for net income.

Question

Quizplus · Accepted Answer

Both the traditional income statement and the contribution margin approach are methods of determining the net income of a company, and if calculated correctly, they should yield the same result. The traditional income statement deducts all expenses, including fixed costs, from revenues to calculate net income, while the contribution margin approach deducts only variable costs from revenues to determine the contribution margin, and then deducts fixed costs to calculate net income. However, in both approaches, the end result should be the same.

Both the Traditional Income Statement Approach and the Contribution Margin