Question

What is the contribution margin?

1) Sales
2) Total variable expenses
3) Cost of goods sold
4) Selling expense

Answer 1

The contribution margin is the difference between sales and total variable expenses. It represents the amount of revenue available to cover fixed costs and contribute to the company's profit.

Step-by-step explanation:

The contribution margin is the difference between sales and total variable expenses. It represents the amount of revenue available to cover fixed costs and contribute to the company's profit. The contribution margin can be calculated using the formula:

Contribution Margin = Sales - Total Variable Expenses

For example, if a company has sales of $10,000 and total variable expenses of $6,000, the contribution margin would be $4,000. This means that $4,000 is available to cover fixed costs and contribute to profit.