10.7 Operating Earnings (EBIT): Standard Accounting (Reporting) versus Cost Acco (158/92) -- Corporate Finance

10.7 Operating Earnings (EBIT): Standard Accounting (Reporting) versus Cost Accounting The accountant and the cost accountant each have their own different ways of arriving at the same operating earnings figure – EBIT. Let’s see how each does his work. | Reporting | Cost Accounting | | Total Revenues | Total Revenues | | (Cost of Goods Sold) | (Variable Costs) | | Gross Profits | Contribution Margin | | (Selling, General, and Administrative Costs) | (Fixed Costs) | | EBIT | EBIT | Neither presentation is “better” than the other necessarily; each simply serves a different function or end. The accounting report is intended to provide a summary of the financial results of the corporation for outside readers’ consumption. The cost accounting analysis is intended for internal assessment and corporate planning purposes alone. Some use Δ Contribution Margin ÷ Δ EBIT to measure DOL. Same difference in terms of ranking one company to another, but not in the actual numbers.