 # Items on variable costing income statement In the following equations, based on the variable costing income statement, identify the items designated by X: a. Sales – X = Manufacturing Margin b. Manufacturing Margin – X = Contribution Margin c. Contribution Margin – X = Income from Operations ### Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307 ### Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

#### Solutions

Chapter
Section
Chapter 19, Problem 19.26EX
Textbook Problem

## Items on variable costing income statementIn the following equations, based on the variable costing income statement, identify the items designated by X: a. Sales – X = Manufacturing Margin b. Manufacturing Margin – X = Contribution Margin c. Contribution Margin – X = Income from Operations

Expert Solution
To determine

Variable costing income statement:

A variable costing income statement is a statement where all variable expenses are deducted from revenue to ascertain a separate contribution margin, from which all fixed expenses are then subtracted to arrive at the net profit or loss for the period.

To identify: the items designated by X in the following equation, based on variable costing income statement.

### Explanation of Solution

Identify the items designated by X in the following equations.

a) Sales - X = Manufacturing Margin

Variable cost of goods sold

Manufacturing margin is calculated by deducting the variable cost of goods sold from sales.

Manufacturing margin = Sales  Variable cost of goods sold

b) Manufacturing Margin - X = Contribution Margin

Contribution margin is the excess of manufacturing margin over variable selling and administrative expenses

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