Question

A contribution margin income statement A. reports gross profit for the period. B. does not report operating income. C. categorizes expenses according

Answer 1

Answer:

C. categorizes expenses according to the cost function

Explanation:

According to the contribution margin income statement, a company shows its sales revenue, fixed and variable expenses. In that case, the company does not show the cost of goods sold. The company directly deducts its variable expenses from sales revenue to determine the contribution margin. Therefore, option A is wrong. Each financial statement of performance (Whether for manufacturing or non-manufacturing), has to be shown. Therefore, the contribution margin format shows the net operating income. It is also false.

As in contribution margin format, fixed and variable expenses are deducted from sales. Therefore, option C is correct.

Answer 2

Group of answer choices:

A) reports gross profit for the period.

B) does not report operating income.

C) categorizes expenses according to cost function.

D) would primarily be reviewed by parties external to the​ company's operations.

E) provides behavioral information about the​ company's operating results.

Answer:

The correct answer is letter "E": provides behavioral information about the​ company's operating results.

Explanation:

The contribution margin income statement is used to compare current to previous operating income also called net income. To calculate the contribution margin the total variable costs are subtracted from the total sales. The result will be the contribution margin. Then, the fixed costs are deducted from the contribution margin resulting in the net profit or loss of the current period.  

Contribution margin statements are used internally exclusively for managers to have a better idea of the behavior of the variables and fixed costs separately.