Answered: Explain income statement under…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Explain income statement under contribution margin format.

Expert Solution

Step 1

Contribution margin: It refers to the difference between the selling price per unit of a product and the variable cost incurred in making per unit of the same product. It usually represents that portion of the sales revenue per unit that is not consumed by the variable expenses and it can be used towards the coverage of fixed expenses.

Step 2

Income statement: It refers to a financial statement of the corporation that is used for showing the total revenues and expenses incurred by the corporation during a particular period. It shows the transformation of the corporation’s revenue into the net profits.

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