Under the contribution approach,variable selling and administrative expenses are used to calculate ________.Under the absorption approach,variable selling and administrative expenses are used to calculate ________.
A)contribution margin; operating income
B)gross margin; operating income
C)contribution margin; gross margin
D)gross margin; contribution margin

Question

Quizplus · Accepted Answer

Under the contribution approach, variable selling and administrative expenses are subtracted from revenues to calculate contribution margin, which is then used to calculate operating income. Under the absorption approach, variable selling and administrative expenses are included in the calculation of cost of goods sold, which is subtracted from revenues to calculate gross margin. Gross margin is then used to calculate operating income.

Under the Contribution Approach,variable Selling and Administrative Expenses Are Used