Question

Companies that wish to distribute their income statements to outside parties such as banks must prepare those statements using the traditional income statement format. These same companies may also prepare contribution margin income statements to more fully understand their costs. The following terms are commonly used in describing contribution margin income statements and related topics.
Gross profit ......... Decrease
Contribution margin ..... Fixed costs
Net income .......... Contribution margin ratio
Variable costs ....... Increase

Required
Choose the term from the list above that most appropriately completes the following statements.
a. Once a company has paid all of its fixed costs, net income increases in an amount equal to ___________ for each unit sold to customers.
b. When production and sales are equal, whether a company prepares a traditional income statement or a contribution margin income statement, two numbers do not change. One of these is sales and the other is ___________.
c. ___________, the difference between sales and cost of goods sold, is not reported on the contribution margin income statement.
d. For every unit sold, contribution margin will ___________ in total.
e. The ___________ is computed by dividing the contribution margin by sales dollars.
f. Of these two cost categories, only ___________ increases and decreases contribution margin.
g. If a company is unable to increase sales or ___________ variable costs, the company can increase net income by reducing ___________.



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  • CreatedMarch 11, 2015
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