The traditional income statement uses absorption costing to create the income statement. This income statement looks at costs by dividing costs into product and period costs. In order to complete this statement correctly, make sure you understand product and period costs..An alternative format is the contribution margin income statement, in which variable expenses are aggregated into what would have been the cost of goods sold block in a traditional income statement. All other costs, which should be fixed costs, are aggregated into a block that is positioned below the contribution margin line .The basic difference between a traditional income statement and a contribution margin income statement lies in the treatment of variable and fixed expenses. This difference of treatment of two types of costs affects the format and uses of two statements. In this article, we shall discuss two main differences of two income .
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