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 future profits at different levels of activity

Question

Quizplus · Accepted Answer

The contribution margin income statement can be used to predict future profits at different levels of activity by analyzing how changes in sales volume affect the contribution margin and net income. It categorizes costs as either fixed or variable and provides a clear picture of the profitability of different products, services or business segments. The statement does not report gross margin, which is a measure of profitability that includes both variable and fixed costs. The contribution margin income statement is not a required form of external reporting to shareholders, but it can be useful for internal decision-making and analysis.

The Contribution Margin Income Statement ________