Asked by ariana marie on May 18, 2024
Verified
Contribution margin is
A) the excess of sales revenue over variable cost
B) another term for volume in the "cost-volume-profit" analysis
C) profit
D) the same as sales revenue
Contribution Margin
Contribution margin represents the difference between sales revenue and variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.
Sales Revenue
The total amount of money generated from the sale of goods or services before any costs or expenses are deducted.
Variable Cost
Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.
- Calculate the contribution margin and understand its significance in CVP analysis.
Verified Answer
MA
Michelle AmezquitaMay 23, 2024
Final Answer :
A
Explanation :
Contribution margin is calculated by subtracting variable costs from sales revenue. It represents the amount of revenue that is available to cover fixed costs and contribute to profits. Therefore, the correct option is A.
Learning Objectives
- Calculate the contribution margin and understand its significance in CVP analysis.