Which of the following is an accurate statement regarding gross margin and contribution margin?
A) All variable costs are subtracted from sales to arrive at both the contribution margin and the gross margin.
B) All fixed and variable costs are subtracted from sales to arrive at both the gross margin and the contribution margin.
C) Contribution margin and gross margin represent the same concept and therefore the terms may be used interchangeably.
D) Gross margin is reached by subtracting both variable and fixed manufacturing costs from sales, while contribution margin is reached by subtracting all variable costs from sales.

Question

Quizplus · Accepted Answer

Cost of goods sold includes both variable and fixed manufacturing costs. Gross margin is calculated by subtracting cost of goods sold from sales. Therefore, gross margin is equal to sales less variable and fixed manufacturing costs.

Which of the Following Is an Accurate Statement Regarding Gross