Segmented Income Statements Using Variable Costing

The video tutorial explains the concept of a variable costing income statement, which differs from a traditional income statement by focusing on contribution margin. It details how variable expenses are deducted from revenue to calculate the contribution margin, followed by the subtraction of fixed expenses to determine net profit or loss. The tutorial highlights the differences between variable costing and traditional income statements, emphasizing the aggregation of fixed costs and the ease of calculating certain variables. The benefits of using variable costing, such as better understanding of expense variations with revenue changes, are also discussed.

What is the primary focus of a variable costing income statement?

• Gross margin

• Revenue growth

• Contribution margin

• Net profit calculation

Which expenses are deducted from revenue to calculate the contribution margin?

• Fixed production expenses

• Variable production and selling expenses

• Only administrative expenses

• Total expenses

What is subtracted after the contribution margin to determine net profit or loss?

• Revenue

• Variable production expenses

• Gross margin

• Fixed expenses

How are fixed production costs treated in a variable costing income statement?

• Aggregated at a lower level after the contribution margin

• Ignored in the statement

• Included in variable costs

• Aggregated at a higher level

What replaces the gross margin in a variable costing income statement?

• Revenue

• Fixed costs

• Contribution margin

• Net profit