Select from the following the incorrect statement regarding contribution margin.
A) Sales − Fixed costs = Contribution margin
B) Net income + Total fixed costs = Contribution margin
C) At the breakeven point (where the company has neither profit nor loss), Total fixed costs = Total contribution margin
D) Total sales revenue times the contribution margin percentage = Total contribution margin

Question

Quizplus · Accepted Answer

The correct formula for contribution margin is Sales - Variable Costs, not Sales - Fixed Costs. Fixed costs are not subtracted to find the contribution margin; instead, they are considered later in the calculation of net income.

Select from the Following the Incorrect Statement Regarding Contribution Margin