While profit margin is the appropriate measure of value for short-term decisions, contribution margin is the appropriate measure for long-term decisions.

Question

Quizplus · Accepted Answer

Contribution margin is more appropriate for short-term decisions as it takes into account the variable costs associated with each unit of product and helps determine how much each product contributes towards covering fixed costs and generating profit. Profit margin, on the other hand, considers all costs, including fixed costs, and is best used for evaluating the overall profitability of a business over a longer period of time.

While Profit Margin Is the Appropriate Measure of Value for Short-Term