Question

Which of the following would not be an acceptable way to express contribution margin? Select one: a. Sales minus variable costs b. Sales minus unit costs c. Unit selling price minus unit variable costs d. Contribution margin per unit divided by unit selling price

Answer 1

Answer:

The correct answer is option b.

Explanation:

The contribution margin can be defined as part of the revenue that is not spent on the variable costs. The word contribution represents the part of the revenue that is not spent on variable costs and thus contributes to covering fixed costs.  

It is an important concept in the break-even analysis.  

There are several ways to calculate contribution margin. It can be calculated by deducting variable costs from total sales. It can also be calculated by deducting unit variable costs from the unit selling price. The contribution margin ratio is calculated by dividing the contribution margin per unit by unit selling price.