Which of the following income statement formats is most commonly used with flexible budgeting?
A) Sales - Variable costs = Contribution margin;Contribution margin - Fixed costs = Net income
B) Sales - Cost of goods sold = Gross margin;Gross margin - Operating expenses = Net income
C) Sales - Manufacturing costs - Selling and administrative costs = Net income
D) None of these answers is correct.

Question

Quizplus · Accepted Answer

The contribution margin income statement format is commonly used with flexible budgeting, as it separates costs into variable and fixed categories, which allows for easier analysis of the impact of changes in sales volume or activity levels. This format also highlights the contribution margin, which is the amount of revenue that is available to cover fixed costs and contribute towards net income.

Which of the Following Income Statement Formats Is Most Commonly