Gross margin is to absorption costing as which of the following is to variable costing?
A) net income
B) gross profit
C) territory margin
D) contribution margin

Question

Quizplus · Accepted Answer

Gross margin and gross profit are essentially the same thing in absorption costing and variable costing, respectively. However, since variable costing does not allocate fixed manufacturing overhead costs to products, there is no gross margin, but rather a calculation of contribution margin which represents the amount of revenue that's left after covering variable expenses. Therefore, the answer is D) contribution margin.

Gross Margin Is to Absorption Costing as Which of the Following