| Course | AC239 Managerial Accounting |
|---|---|
| Unit | Unit 3 |
| Paper type | Contribution income statement |
| Length | About 540 words, 4 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC239 Unit 3
Same Year, Same $250,000, Two Shapes: A Unit 3 Contribution Income Statement Rebuilt From a Traditional One
[Student Name]
Purdue University Global
AC239: Managerial Accounting
Unit 3 Contribution Income Statement
[Instructor Name]
[Date]
Burrow Bedworks and its figures are composite; the textbook, the management accounting history and the cost behavior study cited are real.
Traditional Format
1. Sales: $2,040,000.
2. Cost of goods sold: $1,150,000, made up of fixed manufacturing overhead of $310,000 on top of variable manufacturing costs of $840,000.
3. Gross margin: $890,000.
4. Selling and administrative expenses: $640,000, of which $168,000 varies with sales and $472,000 is fixed.
5. Operating income: $250,000.
Contribution Format, With Per-Unit and Ratio Columns
1. Sales: $2,040,000; $85.00 per bed; 100.0 percent.
2. Variable manufacturing costs, foam, fabric, zippers, direct labor and variable overhead: $840,000; $35.00; 41.2 percent.
3. Variable selling costs, commissions of $122,400 and freight to customers of $45,600: $168,000; $7.00; 8.2 percent.
4. Total variable costs: $1,008,000; $42.00; 49.4 percent.
5. Contribution margin: $1,032,000; $43.00; 50.6 percent.
6. Fixed manufacturing overhead: $310,000.
7. Fixed selling and administrative costs: $472,000.
8. Total fixed costs: $782,000; $32.58 per bed at this year's volume.
9. Operating income: $250,000; $10.42 per bed; 12.3 percent.
Operating income agrees with the traditional statement at $250,000, because production equaled sales this year, so no fixed overhead was carried into or out of inventory.
What Moved Between the Statements
Two groups of cost changed places. Variable selling costs left selling and administrative expenses and joined the variable costs above the contribution line, because they rise with each bed sold just as foam does. Fixed manufacturing overhead left cost of goods sold and moved below the line, because it does not change with the number of beds made. Gross margin, which mixes variable and fixed costs, disappears from the contribution version.
The contribution format answers a question the traditional statement cannot: each additional bed sold at the average price adds $43.00 to profit, because the fixed costs are already covered at this volume.
Why the Per-Unit Columns Need Care
The $32.58 of fixed cost per bed is an average at 24,000 beds, not a cost of making one more bed. At 30,000 beds it would fall to $26.07. Treating it as if it were variable is the classic error the contribution format exists to prevent (Franklin et al., 2019). The variable figures per bed, $42.00 in total, should hold across a reasonable range of volume, though even costs treated as fixed tend to fall more slowly when volume drops than they rose when it grew (Anderson et al., 2003).
What the Owner Can Do With It
The 50.6 percent contribution margin ratio means that every $1,000 of added sales should add about $506 of profit, provided fixed costs stay put. It also explains why a 10 percent drop in sales, $204,000, would cut operating income by about $103,000, or 41 percent, which is the sensitivity the next unit's cost volume profit analysis measures. Management accountants have argued for decades that statements built around cost behavior serve internal decisions better than those built for external reporting (Johnson & Kaplan, 1987). The traditional format remains the one the lender sees; the contribution format is the one the owner should price from.
References
Anderson, M. C., Banker, R. D., & Janakiraman, S. N. (2003). Are selling, general, and administrative costs "sticky"? Journal of Accounting Research, 41(1), 47-63. https://doi.org/10.1111/1475-679X.00095
Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/details/books/principles-managerial-accounting
Johnson, H. T., & Kaplan, R. S. (1987). Relevance lost: The rise and fall of management accounting. Harvard Business School Press.
AC239 Unit 3 instructions, in plain terms
The third AC239 unit supplies a traditional income statement and asks for a contribution format version. Identify which costs in cost of goods sold and in selling and administrative expenses are variable and which are fixed. Rebuild the statement: sales, all variable costs from production and selling together, contribution margin, then fixed manufacturing and fixed selling and administrative costs, then operating income. Confirm that operating income agrees with the traditional version, and explain any difference caused by inventory changes. Add per-unit and percentage columns. Many sections also ask what the contribution margin means for decisions. Keep the two statements on one page so a grader can compare them. Two pages is normal; support the reclassification rules with an APA 7 textbook citation.
How the AC 239 Unit 3 example is put together
The sample lists the traditional statement in five lines, with cost of goods sold and selling expense each split into variable and fixed parts. The contribution version follows with per-bed and percentage figures: sales of $85.00, variable manufacturing of $35.00, variable selling of $7.00, contribution of $43.00, fixed costs of $32.58 per bed at this volume and operating income of $10.42. A note explains the agreement. A section describes which costs moved and why gross margin disappears. The highlighted sentence states what each additional bed adds. A section warns that fixed cost per bed falls as volume rises, citing sticky cost research. A closing section turns the ratio into a sensitivity and cites the history of management accounting.
Where the points sit in the AC239 Unit 3 rubric
Contribution statements are graded on correct classification of every cost and on operating income that agrees with the traditional format. Variable selling costs must move above the contribution line, and fixed manufacturing overhead must move below it. Per-unit and ratio columns are often separate rubric items. Explaining why the statements agree, or why they would differ with inventory changes, shows understanding. Interpreting the contribution margin for decisions earns credit. Treating fixed cost per unit as variable is a frequent error graders look for. Neat side-by-side layout helps. Correct APA 7 citations complete the grade, and a one-line note confirming the two operating income figures agree often earns a small separate point.
AC239 Unit 3 help: mistakes that cost points
The most frequent contribution statement error is leaving commissions or freight in fixed costs because they appear among selling expenses. Others keep fixed overhead inside cost of goods sold. Gross margin is carried into the contribution version, mixing the two formats. Operating income fails to agree and the reason is not explained. Per-unit fixed cost is presented as if it would stay the same at a different volume. Ratios are computed on the wrong base. If your traditional statement is ready but the classification is unclear, a writer can rebuild it from your problem.
Get an AC239 Unit 3 example written to your instructions
Begin the request with the income statement Unit 3 provides, any cost behavior details that came with it, the instructions and the rubric. The split schedule, both statements and the per-unit columns return inside 24-48h, operating income reconciled and any gap explained. The first custom sample carries no charge and follows the column layout your instructions specify. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC239 Unit 3 questions, answered
Why does the contribution format matter if operating income is the same?
Because the middle of the statement answers different questions. Gross margin says how much sales exceed production cost; contribution margin says how much each additional sale adds toward fixed costs and profit. Only the second lets a manager predict what happens to operating income when volume changes, which is why the break-even work in AC239 is built on it.
Where does a sales commission go?
Above the contribution line, with the other variable costs, even though it is a selling expense rather than a production cost. The contribution format sorts by behavior, not by department, so a commission paid on every sale belongs with materials and direct labor. A salaried sales manager's pay, by contrast, drops below the line as a fixed cost.
What if the problem does not say which costs are variable?
Then the classification is part of the answer. AC239 problems sometimes give total costs at two volumes, which allows each cost's behavior to be inferred, or describe the costs in words. The sample states each assumption in the split schedule, one line per cost, so a grader can disagree with a specific judgment instead of marking the whole statement.
Where can I find a free AC239 Unit 3 sample paper?
This page offers a complete AC239 Unit 3 contribution income statement for a dog bed maker, rebuilt from a traditional statement with per-unit and ratio columns and matching operating income.
Why do both statements show $250,000 in the AC239 Unit 3 sample?
Production equaled sales, so no fixed manufacturing overhead was held in or released from inventory. The two formats then differ only in how they arrange the same costs.