Mgm 5500

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Course: MGM 5500

Assignment #6

A. What is the difference between a contribution income statement and a traditional income statement?

Contribution income statement is an income statement that classifies cost by behavior (fixed cost and variable cost). Traditional income statement is sometimes called the functional income statement. It is an income statement prepared in the multiple-step or single –step income statement format which conforms to Generally Accepted Accounting Principles (GAAP) and can be used for external financial reporting. The main difference between the two is that the contribution income statement list variable costs first, followed by fixed costs. Keeping in mind that GAAP and does not permit businesses to use
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The Bivans Company
Contribution Income Statement
For the Year Ended December 31, 2009

Sales $800,000
Variable Cost (528,000)
Contribution Margin $272,000
Fixed Cost (181,000)
Operating Income $ 91,000

6-26. The following is the contribution income statement for Karl’s Athletic Shop:
Karl’s Athletic Shop
Contribution Income Statement
For the Year Ended December 31, 2009

Sales $422,000
Variable Cost:
Cost of Goods Sold $205,000
Variable Selling Expense 55,000
Variable Administrative
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