Final answer:
On a contribution margin income statement, sales revenue is followed by variable expenses, contribution margin, fixed expenses, and finally net income. The contribution margin is sales revenue minus variable expenses, and net income is obtained after subtracting fixed expenses from the contribution margin.
Step-by-step explanation:
The question asks to place the following items in the order in which sales dollars are applied on a contribution margin income statement: 1) Sales revenue 2) Variable expenses 3) Contribution margin 4) Fixed expenses 5) Net income. The correct order reflects how a contribution margin income statement is structured, which helps in understanding the flow from sales to net income.
- Sales revenue
- Variable expenses
- Contribution margin
- Fixed expenses
- Net income
The contribution margin is calculated by subtracting variable expenses from sales revenue. After that, fixed expenses are deducted from the contribution margin to determine the net income. Regarding the self-check question, the firm's accounting profit is calculated by subtracting the explicit costs (labor, capital, and materials) from the sales revenue. The formula would be: Accounting profit = Sales revenue - (Labor costs + Capital costs + Material costs), which equates to $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.