Contribution margin would be the most important variable in evaluating the performance of:
A) A cost center.
B) A production center.
C) An investment center.
D) A profit center.

Question

Quizplus · Accepted Answer

Contribution margin is the amount of revenue that remains after deducting variable costs, and it indicates the profitability of a product or service. As profit centers are responsible for generating profits, contribution margin would be the most important variable in evaluating their performance. Cost centers focus on reducing costs, production centers focus on efficiency in production, and investment centers focus on return on investment. However, profit centers' primary goal is to maximize profits, making contribution margin the most important variable in evaluating their performance.

Contribution Margin Would Be the Most Important Variable in Evaluating