Contribution margin means:
A)what remains from total sales after deducting fixed expenses.
B)what remains from total sales after deducting cost of goods sold.
C)the sum of cost of goods sold and variable expenses.
D)what remains from total sales after deducting all variable expenses.

Question

Quizplus · Accepted Answer

Contribution margin is the amount of money left from total sales after deducting all the variable expenses. It is the amount that contributes towards covering the fixed expenses and generating profit. Therefore, option D is the correct answer. Option A is incorrect because it only deducts fixed expenses. Option B is incorrect because it only deducts cost of goods sold. Option C is incorrect because it only adds cost of goods sold and variable expenses.

Contribution Margin Means