Variable Costing Contribution Format Income Statement

Income statement variable for month ended may sales 9 000 x 8 per unit 72 000 variable costs.

Variable costing contribution format income statement. Every dollar of revenue generated goes into either of contribution margin or variable costs. Contribution margin income statement format. A contribution margin income statement is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin from which all fixed expenses are then subtracted to arrive at the net profit or net loss for the period. Calculating your contribution margin income.

A variable cost changes with the amount of production while a fixed cost stays constant regardless of the amount of production. It is useful to determine the proportion of expenses that actually varies directly with revenues. The variable costing income statement is one where all variable expenses are subtracted from revenue which results in contribution margin. Net product revenue sales total variable costs product revenue for example if your product revenue was 500 000 and total variable expenses were 250 000 your contribution margin would be 250 000 500 000 or 50.

Cost of goods sold 9 000 x 3 30 per unit 29 700 selling expenses 9 000 x 0 20 per unit 1 800 total variable. The formula for your contribution margin is. The basic format of the statement is as follows. A contribution format income statement also known as a contribution margin income statement separates a business s costs into variable costs and fixed costs.

Fixed costs are treated the same way at the bottom of the statement. 1 the difference of format. Unlike a traditional income statement the expenses are bifurcated based on how the cost behaves. From this all fixed expenses are then subtracted to arrive at the net profit or loss for the period.

A variable costing income statement is one in which all variable expenses are deducted from revenue to arrive at a separately stated contribution margin from which all fixed expenses are then subtracted to arrive at the net profit or loss for the period. It is helpful to calculate the variable product cost before starting especially if you will need to calculate ending inventory.