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Calculating the contribution margin income statement shows the separation of fixed and variable costs.
The CVP income statement is prepared for both internal and external use.
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It is the amount available to cover fixed costs to be able to generate profits. Cost-Volume Profit Analysis Contribution Margin and Contribution Margin Percentage The first step required to perform a CVP analysis is to display the revenue and expense line items in a Contribution Margin Income Statement and compute the Contribution Margin Ratio. The CVP formula can be used to calculate the sales volume needed to cover costs and break even, in the CVP breakeven sales volume formula, as follows: Contribution margin indicates how sales affects profitability.
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