Module 3 – Case
Variable and Fixed Costs
Managerial accounting emphasizes short-term profit analysis, so the income statement is very important. Consequently, we will examine and discuss income statements in this Case.
Keep the analysis from the SLP in mind when addressing the questions below.
- Explain the main differences between the absorption and contribution (behavioral, variable) income statements. Will net income always be the same under the two approaches? If not, explain the difference.
- Comment specifically on why companies feel the need to create yet another income statement in a different format. What information can the company glean from this approach which is helpful as a tool in the decision-making process?
- Explain situations in which break-even analysis can be a useful tool. Provide a specific example.
The submission should be 2 to 4 pages and needs to include answers to all the questions listed above. Include references in APA format.
It is important to answer the questions above. The discussion should be two to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.