Contribution Margin Income Statement. Last month Palermo Company sold its product for $60 per unit. Fixed production costs were $40,000, and variable production costs amounted to $15 per unit. Fixed selling and administrative costs totaled $26,000, and variable selling and administrative costs amounted to $5 per unit. Palermo produced and sold 7,000 units last month. 

Required: 

a. Prepare a traditional income statement for Palermo Company.

b. Prepare a contribution margin income statement for Palermo Company. 

c. Why do companies use the contribution margin income statement format?