Man Acct Reading 1

Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000

$80k (Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000)

Sales revenue minus variable expenses equals

Contribution Margin

Selling and administrative costs are ______ costs.

direct or indirect

Contribution margin is

sales revenue minus variable costs

Differential cost is

the difference in cost between two alternatives also known as incremental cost

An income statement focusing on product and period costs has been prepared using a(n) ___ format, while a(n) ___ format income statement makes a distinction between fixed and variable costs

traditional contribution

Which of the following are differences between the traditional and contribution format to income statements?

Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.

The difference in costs between two alternatives is called a(n) ______ cost.

incremental

The difference in revenues between two alternatives is called

incremental revenue

On a traditional income statement, cost of goods sold ___ reports the costs attached to merchandise sold during the period, while selling and administrative expenses report all ___

product period