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National Linen Contribution Margin uses and statement

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What makes a contribution income statement unique? Using the company (National Linen) discuss how a contribution income statement could be used to improve planning in that particular company.

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Tutorial:

A contribution margin income statement sorts expenses by their behavior, either variable or fixed. A traditional income statement sorts by product or nonproduct. See exhibits below:

CONTRIBUTION MARGIN FORMAT
Sales
-COGS < --- product costs
=Gross Profit
-Operating expenses < -- non product costs
=Operating income

TRADITIONAL FORMAT
Sales
-variable costs < --- includes variable product and nonproduct costs
= ...

Solution Summary

Your discussion is 269 words and shows classic traditional and contribution margin formats and discusses several ways National Linen uses a contribution margin to make decisions.

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