Which of the following statements is true regarding the format of a single-step income statement?

• A. It reports variable costs separately from fixed costs.
• B. It includes a gross profit subtotal before operating expenses.
• C. It does not report variable costs separately from fixed costs.
• D. It lists operating and non-operating expenses in separate sections.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a single-step income statement: A single-step income statement is a simplified format of presenting financial performance. It does not separate costs into categories like variable and fixed costs, nor does it include subtotals like gross profit.
2. Review the structure of a single-step income statement: It lists all revenues together in one section and all expenses together in another section, without distinguishing between operating and non-operating expenses.
3. Analyze the first option: 'It reports variable costs separately from fixed costs.' This is incorrect because a single-step income statement does not differentiate between variable and fixed costs.
4. Analyze the second option: 'It includes a gross profit subtotal before operating expenses.' This is incorrect because a single-step income statement does not calculate or display gross profit; it directly subtracts total expenses from total revenues.
5. Analyze the correct option: 'It does not report variable costs separately from fixed costs.' This is true because the single-step income statement aggregates all expenses without categorizing them as variable or fixed.