Contribution margin is: A) Another term for volume in cost-volume-profit analysis B) The excess of sales revenue over variable cost C) Profit D) The same as sales revenue
Understand the Problem
The question is asking for the definition of contribution margin in the context of financial analysis, specifically cost-volume-profit analysis. It requires identifying the correct option among the given choices.
Answer
The excess of sales revenue over variable cost
The final answer is B) The excess of sales revenue over variable cost
Answer for screen readers
The final answer is B) The excess of sales revenue over variable cost
More Information
The contribution margin helps businesses understand how much revenue is available to cover fixed costs after variable costs have been covered. It is an important figure in determining profitability and break-even points.
Tips
Confusing contribution margin with profit or sales revenue is a common mistake. Contribution margin only considers variable costs, not fixed costs or total profitability.
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