The difference between sales revenues and the total of variable costs is:
A) the breakeven point.
B) gross operating profit.
C) net profit.
D) the contribution margin.

Question

Quizplus · Accepted Answer

The difference between sales revenues and the total of variable costs is known as the contribution margin. It represents the amount of money each unit sold contributes towards covering fixed costs and generating profit. Therefore, the correct answer is D, the contribution margin. Choices A, B, and C are not correct as they refer to different accounting concepts: the breakeven point represents the sales level where total costs and revenues are equal; gross operating profit is the total profit generated after deducting cost of goods sold and operating expenses, but before deducting taxes and interest; and net profit is the final amount of profit obtained after all expenses, including taxes and interest, have been deducted from total revenues.

The Difference Between Sales Revenues and the Total of Variable