Question

Which of the following is the income statement formula for the variable costing method? Sales Revenue...

Which of the following is the income statement formula for the variable costing method?

Sales Revenue - All Variable Costs = Contribution Margin - All Fixed Expenses = Operating Income

Sales Revenue - Cost of Goods Sold = Gross Margin - All Fixed Expenses = Operating Income

Sales Revenue - Variable Manufacturing Costs = Contribution Margin - Fixed Manufacturing Costs = Operating Income

Sales Revenue - Cost of Goods Sold = Gross Margin - Selling and Administrative Expenses = Operating Income

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Answer #1

Sales Revenue - All Variable Costs = Contribution Margin - All Fixed Expenses = Operating Income

There are two very popular method of preparig income statement.One is absorbtion costing and other is Variable costing.Under absorbtion costing method, first of all,Cost of goods sold are reduced from sales revenue to arrive at Gross Margin and after that all other operating exxpenses are reduced from gross prodit to get operating income. But, under variable costing, all variable costs either, cost of goods sold, Variable manufacturing cost, Variable selling expenses etc. are reduced from sales revenue to get contribution margin and after that all fixed costs either manufactrung or selling etc. are reduced from contribution margin to get operating income.

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