Asked by Travis Williams on May 02, 2024
Verified
Contribution margin is:
A) Sales less cost of goods sold.
B) Sales less variable production, variable selling, and variable administrative expenses.
C) Sales less variable production expense.
D) Sales less all variable and fixed expenses.
Contribution Margin
The gap between sales income and variable expenses, showing the extent to which income helps in covering fixed expenses.
- Compute and comprehend the contribution margin's role and importance within the scope of cost-volume-profit analysis.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
B
Explanation :
Contribution margin is the amount of money available to cover fixed expenses and contribute to profits after variable expenses have been subtracted from sales. Therefore, the best choice is B which subtracts all variable expenses including variable production, variable selling and variable administrative expenses from sales to arrive at the contribution margin.
Learning Objectives
- Compute and comprehend the contribution margin's role and importance within the scope of cost-volume-profit analysis.
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