Explain the Difference Between the Gross Margin Format and the Contribution

question 50

Essay

Explain the difference between the gross margin format and the contribution margin format for the income statement. What information is highlighted with each?

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Definitions:

Shipment Contract

A contract that requires the seller to arrange for the transportation of goods to the buyer, where the risk of loss passes to the buyer upon the seller's delivery to the carrier.

FOB Miami

A shipping term indicating that the seller of goods is responsible for them until they're loaded onto a vessel in Miami; from that point, the buyer assumes risk and costs.

Destination Contract

A type of contract where the seller is responsible for the goods until they are delivered to a specified destination.

Consignment

An arrangement where goods are left in the possession of another party to sell, but the consignor retains ownership until the goods are sold.