Question
Contribution margin is the excess of sales over a. fixed costs. b. operating income. c. cost of goods sold. d. variable costs.
Ask by Salinas Patel. in the United States
Feb 24,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The contribution margin is the amount after subtracting variable costs from sales.
Solution
The contribution margin is defined as sales revenue minus variable costs. It shows the amount available to cover fixed costs and contribute to operating income after covering the variable costs of production.
So, the correct answer is:
d. variable costs.
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Simplify this solution Beyond the Answer
The contribution margin represents the amount remaining from sales revenue after variable costs have been subtracted. It’s a crucial metric in analyzing how much money is available to cover fixed costs and contribute to profit. This means that option **d. variable costs** is the correct answer! Understanding contribution margin is essential for decision-making in both pricing strategies and product line management. Businesses often utilize this metric to determine which products are worth continuing, phasing out, or promoting more aggressively – making it a valuable tool in optimizing profitability!
