Question

How does a contribution margin income statement differ from a traditional income statement?

Short answer

Answer

Contribution margin income statement differs from traditional income statement because it considers only variable cost to determine gross profit.

Step-by-step solution

Contribution margin income statement

Contribution margin income statement is a modern income statement which considers fixed cost as an irrelevant cost for decision making.

Difference between contribution margin income statement and traditional income statement

Traditional Income Statement	Contribution Margin Income Statement
Net Sales Revenue	Net Sales Revenue
Less: Cost of goods sold [Product costs(variable and fixed production cost)]	Less: Variable costs ( Variable costs)
Gross Profit	Contribution margin
Less: Selling and administrative expenses[variable and fixed)]	Less: Fixed costs ( all fixed cost)
Operating Income	Operating income