Question

Contribution margin is:

A) sales less variable production expense
B) sales less cost of goods sold
C) sales less all variable and fixed expenses
D) sales less variable production, variable selling, and variable administrative expenses
E) none of the above

Answer 1

The correct answer is letter "D": sales less variable production, variable selling, and variable administrative expenses.

Step-by-step explanation:

Contribution Margin is the difference between the revenue from sales and variable costs. This helps a company to analyze the profitability of individual products by calculating how earnings are influenced by sales. In other words, the contribution margin represents the portion of revenues that are used to cover fixed expenses such as administrative staff payments.