During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SGA expenses the same. As a result, XYZ’s:Contribution margin and gross margin will be lower.Contribution margin will be higher, while its gross margin will remain the same.Operating income will be the same under both the financial accounting income statement and contribution income statement.Inventory amounts booked under the financial accounting income statement will be lower than under the contribution income statement.

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Asked Dec 21, 2019
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During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SGA expenses the same. As a result, XYZ’s:

  1. Contribution margin and gross margin will be lower.
  2. Contribution margin will be higher, while its gross margin will remain the same.
  3. Operating income will be the same under both the financial accounting income statement and contribution income statement.
  4. Inventory amounts booked under the financial accounting income statement will be lower than under the contribution income statement.
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Expert Answer

Step 1

Cost-Volume-Profit Analysis (CVP Analysis): CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Step 2

Cost-Volume-Profit Analysis (CVP Analysis): CVP Analysis is a tool of cost accounting that measures the effect of vari...

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Given below is the operating income as per financial accounting income statement: Particulars Amount Revenue Less: Cost of goods sold Gross profit |Less: selling and administrative expenses(fixed and variable) Operating Income (EBIT) Table number (1) Given below is the operating income as per contribution income statement: Particulars Amount Sales |Less: Variable cost Contribution margin |Less: Fixed expenses Net operating Income (EBIT) Table number (2)

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Cost Volume Profit Analysis

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