Question

Which of the following approaches to preparing an income statement includes a calculation of the gross margin?

Traditional Approach Contribution Approach
A. Yes No
B. Yes No
C. No Yes
D. No No
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Answer 1

The Traditional Approach to preparing an income statement includes a calculation of the gross margin, which is determined by subtracting the cost of goods sold from net sales.

Step-by-step explanation:

The correct choice is A) Choice A, Traditional Approach. The Traditional Approach to preparing an income statement includes a calculation of the gross margin. The gross margin is calculated by subtracting the cost of goods sold (COGS) from the net sales.

On the other hand, the Contribution Approach does not include a calculation of the gross margin. It focuses on separating fixed costs and variable costs to determine the contribution margin, which is the amount remaining after deducting variable costs from net sales.