Asked by Celeste Machado on Jul 13, 2024
Verified
How does contribution margin differ from gross margin?
Contribution Margin
The amount remaining from sales revenue after variable expenses are deducted, used to cover fixed costs and generate profits.
Gross Margin
Gross Margin is the difference between revenue and the cost of goods sold, divided by revenue, expressed as a percentage. It indicates the percentage of revenue that exceeds the cost of goods sold.
- Comprehend and compute the contribution margin along with its importance.
Verified Answer
AH
Alexander HartzlerJul 16, 2024
Final Answer :
Contribution margin equals sales less variable expenses.This is a subtotal used in variable costing where costs are grouped according to cost behavior.Gross margin equals sales less cost of goods sold.This is a subtotal used in absorption costing where expenses are grouped according to function.
Learning Objectives
- Comprehend and compute the contribution margin along with its importance.