Asked by Vivian Ramirez on May 06, 2024
Verified
Contribution margin is
A) the amount of revenue remaining after deducting fixed costs.
B) available to cover fixed costs and contribute to income for the company.
C) sales less fixed costs.
D) unit selling price less unit fixed costs.
Contribution Margin
The amount by which product sales revenue exceeds variable costs, showing how much contributes to covering fixed costs and generating profit.
Fixed Costs
Business expenses that do not change regardless of the level of production or sales activities, such as rent, salaries, and insurance.
Revenue
The total amount of income generated by the sale of goods or services related to a company's primary operations.
- Compute and elucidate the contribution margin, comprehending its critical role within Cost-Volume-Profit analysis.
Verified Answer
ZZ
Zaria ZepherinMay 09, 2024
Final Answer :
B
Explanation :
Contribution margin is defined as the amount of revenue remaining after deducting variable costs, which is then available to cover fixed costs and contribute to net income for the company. Choices A, C, and D incorrectly describe the concept by either focusing on fixed costs or inaccurately defining the calculation.
Learning Objectives
- Compute and elucidate the contribution margin, comprehending its critical role within Cost-Volume-Profit analysis.