Question

The contribution margin approach helps managers in short-term decision making because it ________

Answer 1

The contribution approach is a presentation format used for calculation of the break-even point, which is the point of zero profit or loss. The contribution margin approach helps managers in short-term decision making because it reports costs and revenues at present value.

Answer 2

The contribution margin approach helps managers in short-tern decision making because it reports costs and revenues at their current value. 

The contribution margin ratio/approach allows companies to determine their profits they can make from a product minus variable costs.