Problem:
Discusses the concept of contribution margin (CM). CM is the first step in arriving at CVP analysis. Discuss the importance of computing CM and how often you think organizations should track changes in CM. Do you think CM analysis can be performed at the departmental level? Do you think it can be performed even down to the product level, i.e. produce versus cheese in a grocery store? (200 words)
Please discuss what you think the informational differences are between the two financial statements. This will further support your first module’s learning outcomes in understanding the differences between cost, managerial, and financial accounting. As you can see, both financial statements result in the same operating income, but the way in which they arrive at it is different. Please comment on the differences and which one you think is more informational. (200 words)
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Contribution Income Statement Emphasizing Contribution Margin ( in 000s) Financial Accounting Income Statement
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Emphasizing Contribution Margin ( in 000s) Financial Accounting Income Statement Emphasizing Gross Margin ( in 000s)
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Revenues
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$ 1,000
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Revenues
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$ 1,000
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Variable manufacturing costs
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$ 250
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Cost of goods sold ($ 250 + $ 160)
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410
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Variable nonmanufacturing costs
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270
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520
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Contribution margin
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480
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Gross margin
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590
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Fixed manufacturing costs
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160
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Nonmanufacturing costs
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Fixed nonmanufacturing costs
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138
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298
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($ 270 + $ 138)
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408
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Operating income
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$182
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Operating income
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$ 182
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