discussion 4

What makes a contribution income statement unique? Discuss how a contribution income statement could be used to improve planning in a company

The reason that a contribution income statement is unique from other income statements as it reformats the income statement to group together a business's fixed and variable costs

A contribution margin income statement is unique and varies from a normal income statement in the following three ways or the:

•Fixed production costs are aggregated lower in the income statement, after the contribution margin;

•Variable selling and administrative expenses are grouped with variable production costs, so that they are a part of the calculation of the contribution margin; and

•The gross margin is replaced in the statement by the contribution margin.

A contribution income statement could be used to improve planning in a company as it can serve as an excellent tool for managers to help determine whether to keep or drop certain aspects of the business especially those aspects where fixed assets are of some high value.