In break-even analysis the contribution margin is defined as:
A) sales minus variable costs.
B) sales minus fixed costs.
C) variable costs minus fixed costs.
D) fixed costs minus variable costs.

Question

Quizplus · Accepted Answer

The contribution margin is the amount of revenue that is left over after deducting variable costs from sales. Therefore, the correct definition of the contribution margin is "sales minus variable costs." Option B is incorrect because it subtracts fixed costs instead of variable costs to find the contribution margin. Option C is incorrect because it subtracts fixed costs from variable costs, which does not give the correct calculation for contribution margin. Option D is also incorrect because it subtracts variable costs from fixed costs, which is not a useful calculation in break-even analysis.

In Break-Even Analysis the Contribution Margin Is Defined As