Contribution margin is a. the same as sales revenue b. the excess of sales revenue over variable cost c. another term for volume in cost-volume-profit analysis d. profit

Question

Business

Finley Hinton

30 September, 19:17

Contribution margin is a. the same as sales revenue b. the excess of sales revenue over variable cost c. another term for volume in cost-volume-profit analysis d. profit

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Answers (1)

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Bailey Francis · Answer 1

The correct answer is letter "B": the excess of sales revenue over variable cost.

Explanation:

In its most simple form, contribution margin is calculated by subtracting variable costs and expenses from revenues. Contribution margin represents a part of the company's revenues that are not allocated for variable cost. Thus, that portion is used to pay the firm's fixed costs. Contribution margin is low usually for labor-intensive entities while capital-intensive companies tend to have a higher contribution margin.