The term "contribution margin" denotes:
A) The value attained by subtracting variable and fixed costs from revenues.
B) The value attained by subtracting variable and fixed costs from net income.
C) The value attained by subtracting fixed costs from revenues.
D) The value attained by subtracting variable costs from revenues.

Question

Quizplus · Accepted Answer

Contribution margin is the difference between the revenues earned from sales and the variable costs incurred in producing those sales. Therefore, the best choice is option D, which states that contribution margin is attained by subtracting variable costs from revenues. Options A, B, and C are incorrect as they include either fixed costs or net income in the calculation of contribution margin.

The Term "Contribution Margin" Denotes