The contribution margin income statement ________.
A) reports gross margin
B) is allowed for external reporting to shareholders
C) categorizes costs as either direct or indirect
D) can be used to predict operating income at different levels of activity

Question

Quizplus · Accepted Answer

The contribution margin income statement separates costs into variable and fixed categories, allowing for the calculation of the contribution margin ratio. This ratio can be used to predict operating income at different levels of activity, making option D the correct answer. Option A is incorrect because the contribution margin income statement reports the contribution margin, not gross margin. Option B is incorrect because the contribution margin income statement is primarily used for internal decision-making, not external reporting to shareholders. Option C is incorrect because the contribution margin income statement categorizes costs as either variable or fixed, not direct or indirect.

The Contribution Margin Income Statement ________