Which of the following statements about contribution are correct?
(i) If contribution is a positive figure it contributes, first, to covering fixed costs, and second, to profit.
(ii) In order to calculate contribution it is necessary first to split costs into fixed and variable.
A) (i) only
B) Both of them
C) (ii) only
D) Neither of them

Question

Which of the following statements about contribution are correct? 
(i) If contribution is a positive figure it contributes, first, to covering fixed costs, and second, to profit. 
(ii) In order to calculate contribution it is necessary first to split costs into fixed and variable.
A) (i) only
B) Both of them
C) (ii) only
D) Neither of them

Quizplus · Accepted Answer

Statement (i) is correct because contribution is the amount of revenue that remains after variable costs have been subtracted, and this amount can first be used to cover fixed costs and then contribute to profit. Statement (ii) is also correct because contribution cannot be calculated without first identifying and separating fixed and variable costs. Therefore, both statements are true.

Which of the Following Statements About Contribution Are Correct