Select the incorrect statement regarding the contribution margin income statement.
A) The contribution margin approach for the income statement is unacceptable for external reporting.
B) Contribution margin represents the amount available to cover product costs and thereafter to provide profit.
C) The contribution margin approach requires that all costs be classified as fixed or variable.
D) Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.

Question

Quizplus · Accepted Answer

B) is incorrect because the contribution margin represents the amount available to cover fixed costs and thereafter to provide profit, not product costs. Product costs are already accounted for in the calculation of the contribution margin, which is sales revenue minus variable costs.

Select the Incorrect Statement Regarding the Contribution Margin Income Statement