According to Horngren, Sundem, Schatzerg & Burgstahler, “The contribution income statement provides a contribution margin—revenue less all variable costs, including variable selling and administrative costs” while making it simple to comprehend “the impact of changes in sales volume on operating income” (Horngren, pg 185).
Horngren, Sundem, Schatzerg & Burgstahler contend that “Before a company can earn income, its total contribution margin must exceed the fixed costs it has incurred for manufacturing and other value-chain functions” (Horngren, pg 185). Therefore, Chee Wong can utilize the contribution income statement to determine the most supportive for his decisions. He can increase the sales of units of Nectars juice cocktails income, the variable expenses only increased, but the fixed expenses would be the same. However, in the case it needs to increase or decrease selling units income, contribution margin only can make accurate decision would be taken for get more profit from the business.