Asked by Oriana Gallardo on May 05, 2024
Verified
Which of the following would not be an acceptable way to express contribution margin?
A) Sales minus variable costs
B) Sales minus unit costs
C) Unit selling price minus unit variable costs
D) Unit contribution margin divided by unit selling price
Contribution Margin
The difference between the sales revenue of a product and the variable costs associated with its production and sales.
Unit Contribution Margin
The amount that the sale of one unit contributes towards covering fixed costs, calculated as the sales price per unit minus variable costs per unit.
- Acquire knowledge on the calculation of contribution margin and its relevance.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
B
Explanation :
Contribution margin is typically defined as sales revenue minus variable costs. It can be expressed on a per unit basis (unit selling price minus unit variable costs) or for total sales (total sales minus total variable costs). Option B, "Sales minus unit costs," is incorrect because "unit costs" could imply both variable and fixed costs, not just variable costs. The contribution margin specifically excludes fixed costs.
Learning Objectives
- Acquire knowledge on the calculation of contribution margin and its relevance.