Question

The contribution margin income statement is structured to emphasize what?

		Cost Functionality
		Cost Behavior
		Organizational Efficiency
		Cost Drivers

Which of the following statements is correct

		When an equal number of units are produced and sold, net income is significantly higher under the absorption costing than variable costing
		When an equal number of units are produced and sold, net income is higher under variable costing that absorption costing
		When an equal number of units are produced and sold, net income is marginally higher under the absorption costing than variable costing
		When an equal number of units are produced and sold, net income under absorption costing is the same as net income under variable costing

Answer 1

1

The contribution margin income statement is structured to emphasize Cost Behavior

In a contribution margin income statement, costs are divided based on behavior into Variable costs and fixed costs.

Option B Cost Behavior is correct

2

When an equal number of units are produced and sold, net income under absorption costing is the same as net income under variable costing

The difference in net income under absorption costing and under variable costing is because of Fixed manufacturing overhead deferred/released from inventory under absorption costing

When an equal number of units are produced and sold,there is no fixed manufacturing overhead deferred or released from inventory.

Option D is correct