Contribution Margin and net operating income: Contribution margin we find by reducing all the variable costs of a product from its sales. Simply, contribution is selling price minus variable costs. Thus the total contribution represents the total earning available to recover its fixed expenses and to generate profit. Operating income we get by reducing the fixed expenses from the contribution margin. To Prepare: The company’s contribution format segmented income statement that includes a Total column and columns for the East and West regions.

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Chapter 6, Problem 13F15

To determine

Contribution Margin and net operating income:

Contribution margin we find by reducing all the variable costs of a product from its sales. Simply, contribution is selling price minus variable costs. Thus the total contribution represents the total earning available to recover its fixed expenses and to generate profit.

Operating income we get by reducing the fixed expenses from the contribution margin.

To Prepare:

The company’s contribution format segmented income statement that includes a Total column and columns for the East and West regions.

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