Question

If a restaurant offers a steak on the menu that costs $5 and sells for $14.95, the contribution margin is __________ for every steak sold.

Answer 1

$9.95

Step-by-step explanation:

Contribution Margin represents the difference between the variable cost of a product and the revenue derived from its sales. It shows the net amount contributed by sales to cover profits as well as fixed costs.

Contribution margin is calculated by subtracting Variable Cost from Sales

CM= Sales- Variable Cost.

Sales represent the revenue derived from selling a product and Variable Cost is the cost that can be directly traced or directly affects the manufacture of the product sold.

In the question:

Variable Cost- $5

Sales Revenu is $14.95

CM= $14.95 - $5 = $9.95