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Select the incorrect statement regarding the contribution margin income statement. A) The contribution margin approach for the income statement is unacceptable for external reporting. B) The contribution margin approach requires that all costs be classified as fixed or variable. C) Contribution margin represents the amount available to cover product costs and thereafter to provide profit. D) Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.

Respuesta :

The incorrect statement regarding the contribution margin is Contribution margin represents the amount available to cover product costs and thereafter to provide profit. The response is option C.

What is contribution margin ?

The money left over after sales after paying the variable costs related to manufacturing a product is a company's contribution margin, often known as the gross margin. Your net income, or profit, is obtained by deducting fixed costs from your contribution margin, such as rent, equipment leases, and employee pay.

It is an economic phrase that aids managers and company owners in tracking the profitability of their products. Because it demonstrates how much of a product's income is available to pay fixed expenses and contribute to the company's profit, the contribution margin is crucial to comprehend.

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