The absorption and contribution income statements Essay

The absorption and contribution income statements - Essay Example Companies tend to have a need to produce different income statements since different details accrue on each of the statements. In other scenarios, the activities of a business entity may prompt the production of multiple income statements. The reason may be due to the kind of sourcing of the funds and the types of activities and programs that the company undertakes. The user of different income statements is also dependent on the immediate goal of the income statement. Some of the objectives that lead to different losses in profit accounts are the different goals the company may target. They include stablishing the past performance of the business entity, assisting in the future prediction of the future performance of the company or the assessment of the future capability of performance of a particular business entity.  The break-even analysis explains the point in time whereby an operation or a business activity generates no profit and incurs no loss. The analysis is important in establishing the earning impact that a particular marketing activity creates in a specific business activity. An example is the carrying out a break-even analysis after the advertisements of a particular commodity after prior entrance in the market. The analysis can show the differences in periods of supply and the improvement, stagnation or the successive failure of the product advertisement venture. The analysis thus helps managers to establish the diversities that attribute the relationship between sales, costs plus the resulting profits.