E COMPANY MANUFACTURERS

E Company Manufacturers Income Statement

E Company Manufacturers Income Statement(s)

Technical Disparities

The absorption value makes the primary classification of costs for production and no production function, emphasizing the gross profit (i.e., Sales CGS) to cover all fixed and variable selling and administrative expenses.

Contribution Margin value is the primary classification of costs into variable and fixed categories, emphasizing the contribution margin (i.e., variable costs of sales) to cover all fixed costs.

Report Formats

The formats for profit reporting under CM costing and absorption costing are different.

Absorption CostingContribution Margin Costing

RevenuesRevenues



LessLess

Cost of Goods SoldVariable Manufacturing

________________Less

Gross MarginVariable S&A

Less____________________

[Variable S&AContribution Margin

Add

Fixed S&A]Less

________________[Fixed Manufacturing

Add

Net IncomeFixed S&A]

========____________________

Net Income

========

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