This video discusses the Contribution Format Income Statement in Managerial Accounting.
The Contribution Format Income Statement lists costs by their behavior (whether they are fixed or variable) not by their function. Thus, it has the following format:
Revenue – Variable Costs = Contribution Margin – Fixed Costs = Operating Profit
This is advantageous because it allows you to easily calculate the company’s Contribution Margin Ratio, which can be used to calculate the breakeven point with Cost-Volume-Profit Analysis. You can also easily calculate the Degree of Operating Leverage, which is the Contribution Margin divided by the Operating Profit.