Traditional and Contribution Margin
Traditional and Contribution Margin 2304
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This 2 page Class Notes was uploaded by Nikita Hendricks on Friday September 2, 2016. The Class Notes belongs to 2304 at Baylor University taught by Prof. Stuebs in Fall 2016. Since its upload, it has received 8 views. For similar materials see Managerial Accounting in Accounts at Baylor University.
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Date Created: 09/02/16
Managerial Accounting Traditional Income and Contribution Margin Prof. Stuebs Purpose of Traditional Format income statement Consistent with GAAP organizes costs by function. Plan for preparing traditional income statement 1. Sales 2. Cogs-product cost 3. Less operating expenses-period cost Cost Function: the purpose for spending the cost (i.e., product costs (inventory, Cost of Goods Sold), period costs). Traditional income statement. Cost Behavior: The way in which TOTAL COST changes in response to the level of activity (variable costs, fixed costs). Contribution Margin income statement. Purpose of contribution income statement Group costs according to its cost behavior which helps analyze future changes. Contribution margin is sales revenue minus variable cost Contribution margin ratio = contribution margin/unit Sales Rev = Sales price/unit Direct and indirect costs indirect cost is a manufacturing cost that cannot be easily traced to a specific cost object Direct costs that can be easily and conveniently traced to a specific product.