In break-even analysis, the contribution margin is defined as
A) sales price minus variable cost.
B) sales price minus fixed cost.
C) variable cost minus fixed cost.
D) fixed cost minus variable cost.

Question

Quizplus · Accepted Answer

The contribution margin is the amount that each unit sold contributes towards covering the company's fixed costs and generating a profit. It is calculated by subtracting the variable cost per unit from the selling price per unit: Contribution Margin = Selling Price - Variable Cost. Therefore, the correct choice is A, sales price minus variable cost.

In Break-Even Analysis, the Contribution Margin Is Defined as