The contribution margin approach to the income statement:
A)can be used only by manufacturing companies.
B)shows a contribution margin rather than a net income figure at the bottom of the statement.
C)organizes costs on a functional basis.
D)is useful to managers in planning and decision making.

Question

Quizplus · Accepted Answer

The contribution margin approach to the income statement separates variable costs from fixed costs, highlighting the contribution margin (sales revenue minus variable costs). This format is particularly useful for managers in planning and decision making because it clearly shows the amount of revenue available to cover fixed costs and contribute to profit.

The Contribution Margin Approach to the Income Statement