The CVP income statement is a statement for internal use that classifies costs as fixed or variable and reports contribution margin in the body of the statement.
“A CVP income statement is an internal report that is used by managers in making better decisions.” Usually, in this income statement, expenses and costs are recognized based on their behavior – fixed or variable or a mixed cost (fixed and variable cost’s combination).
The CVP income statement is the short form of the cost-volume-profit income statement. It has similar information like a more conventional income statement. But it is planned for showing the effects of changes in volume and costs on a business’s profit. A business uses it as a tool for allowing management for making decisions regarding such things as selling prices, product mix, and production facilities’ best use.
This income statement is only for internal use. Its format depends on the requirements of the business. Generally, expenses are divided as either fixed or variable expenses and totals are calculated for showing contribution margin on a unit basis and business.
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