Which of the following statements regarding gross margin and contribution margin is true?
A) The contribution margin is always less than the gross margin.
B) The contribution margin includes all fixed costs, while the gross margin does not.
C) The gross margin includes all cost of goods sold, while the contribution margin does not.
D) The contribution margin is often represented as a line item on the income statement, while the gross margin is not.

Question

Quizplus · Accepted Answer

The essential difference between the contribution margin and the gross margin is that the gross margin includes all cost of goods sold items, while the contribution margin does not. The classic measure of the profitability of goods and services sold as represented on the income statement is gross margin, which is equal to revenues minus the cost of goods sold.

Which of the Following Statements Regarding Gross Margin and Contribution