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the contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.

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  • The contribution margin income statement allows users to easily judge the impact of a change in selling price, cost, or volume on profit.

The contribution margin income statement is an evaluation of a former sales period. Entrepreneurs use this procedure to determine whether they made a profit or loss during the period.

After their evaluation, they realize the operating income or net income. The contribution margin is generated using this formula,

Net product revenue - Total variable cost ÷ product revenue.

A proper understanding of the fixed and variable costs is essential to accurately calculate the contribution margin.

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