To manage growth and make informed decisions, the company’s Chief Operating Officer requested the company’s contribution margin income statement as well as segmented income statements. The contribution margin income statement is an alternative to the traditional income statement. The difference is that this profit and loss statement separates the variable and fixed expenses involved in running a business. Practice Video Problem 5-2: Companywide and segment breakeven LO7 A contribution margin income statement varies from a normal income statement in three ways. First, fixed production costs are aggregated lower in the income statement, after the contribution margin. Second, variable selling and administrative expenses are grouped with variable production costs, so that they are part of the calculation of the contribution margin. And finally, the gross margin is replaced in the statement by the contribution margin. To work out the contribution margin, you need to understand the difference between an item’s fixed and variable expenses. Traditional income statements are used to evaluate […]