Question

Which of the following would be a line item for a variable costing income statement? Gross margin Cost of goods available for sale Total cost of goods solid contribution margin Work in process inventory

Answer 1

Hello there!

Your answer would be Contribution Margin.

The reason why Contribution Margin would be the correct answer is because a Contribution margin is the selling price subtracting the variable cost. What this does is show the company the cost they have to cover variable costs, this would be known as "revenue." If the company has more money from the selling price after subtracting the variable costs, then they could turn that into what is known as "profit." Contribution Margins would be a line item for a variable costing income statement. It shows a variable costing income statement because  when you have to calculate the Contribution Margin, you would see how much income your variable costs would be. This specifically gives you a number for the variable cost, and it is very noticeable to figure out how much you have to pay back in variable fees.

All of the other answer choices does not provide a variable costing income statement.