Question

In: Finance

Contribution margin may be defined as a. Sales minus ending inventory cost. b. Sales minus cost...

Contribution margin may be defined as

a. Sales minus ending inventory cost.

b. Sales minus cost of goods sold.

C. Gross margin minus selling and administrative expenses.

d. Sales minus variable cost.

Solutions

Expert Solution

The correct option is D.

Contribution margin=Sales-Variable costs

Contribution margin is used to compute the breakeven point and margin of safety for the company.The Fixed costs are also deducted from Contribution margin to compute net operating income for the company.

jeff jeffy answered 2 years ago
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