Question

The contribution margin is determined by subtracting _______.

a. variable product and fixed period cost from sales.
b. fixed product cost from sales.
c. variable product and variable period cost from sales.
d. variable product and fixed product costs from sales.

Answer 1

c. variable product and variable period cost from sales.

Step-by-step explanation:

Contribution Margin is obtained by subtracting the total variable costs from the sales. This is also known as direct costing. Deducting fixed expenses from the contribution margin yields profit . Contribution margin is used in various ratios such as the contribution margin ratio and break even sales is also determined by using it sometimes. Contribution margin is a tool for managers as sales figures guide cost figures. The variable cost of goods sold varies directly with sales volume and the influence of production on profit is eliminated.by deducting only the variable product costs and not the variable period costs we get gross contribution margin. After deducting the variable period costs we get the contribution margin.