Contribution margin cannot be calculated for a service-type business,and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Question

Quizplus · Accepted Answer

This statement is false. Contribution margin can still be calculated for a service-type business by subtracting variable costs from revenue. Cost-volume-profit analysis can also be applied to a service business by analyzing the relationship between sales volume, costs, and profits.

Contribution Margin Cannot Be Calculated for a Service-Type Business,and Cost-Volume-Profit