Which of the following statements describes a traditional income statement?

A traditional income statement is structured primarily around absorption costing, where both fixed and variable manufacturing costs are included in the cost of goods sold. This means that all manufacturing costs, regardless of whether they are fixed or variable, are accounted for when determining the gross profit. As a result, the net income reported in a traditional income statement represents the total revenues minus the total expenses, with those expenses encompassing all costs relating to the production of goods sold.

The absorption costing method is crucial as it allocates all manufacturing costs to the product, which can provide a more comprehensive view of profitability for external reporting. This is why traditional income statements are typically used for external reporting purposes, adhering to generally accepted accounting principles (GAAP).

In contrast to the other options, a traditional income statement does not specifically focus solely on variable costs, nor is it organized by contribution margin—the latter being a characteristic of variable costing statements. It is also not limited to variable cost analysis, as traditional income statements provide a full picture, including both fixed and variable costs. Thus, the correct answer suitably describes this established format and conceptual framework used in accounting.