A contribution margin is defined as ________.
A) the difference between variable costs and fixed costs
B) the difference between demand with promotions and without promotions
C) the perceived value added by marketing mix elements
D) the gap between price and fixed cost
E) the gap between price and variable cost

Question

Quizplus · Accepted Answer

Contribution margin is the difference between the price of a product and its variable cost, which includes the cost of producing and selling the product. Option E accurately describes this definition. Option A is incorrect because it only considers the difference between variable and fixed costs, rather than the overall profitability of the product. Option B and C are also incorrect because they do not relate specifically to the concept of contribution margin. Option D is also incorrect because it only considers fixed costs, not variable costs.

A Contribution Margin Is Defined as ________