Question

*Minimum of 400 words*

Managerial Accounting

Discuss and describe the primary difference between traditional income statements and contribution margin income statements.

Answer 1

Difference between Traditional Income Statement and Fixed Margin Statement

Traditional Income statement is reflects the company`s profit or loss in a given accounting period. Traditional Income Statement uses absorption costing where it includes Variable and Fixed costs while calculating the costs of goods sold whereas Contribution Margin Statement uses Variable costing which describes that the Fixed costs are not included in the product costs and are allocated over the overheads etc.

Traditional Income Statement separates period costs from product costs whereas Contribution Margin Statement separated Variable costs from Fixed Costs.