Which of the following statements unambiguously describes the term 'contribution margin'?
A) Contribution of the business unit towards the company's profits
B) Revenue minus the total manufacturing costs of the business unit
C) Revenue minus all variable costs of the business unit
D) Revenue minus all of the business unit's costs, whether fixed or variable

Question

Quizplus · Accepted Answer

Contribution margin is the difference between revenue and all variable costs of the business unit. It represents the amount that is available to cover fixed costs and contribute towards profit. Options A and D are too broad and can potentially include fixed costs as well. Option B only considers manufacturing costs and does not include other variable costs such as sales commissions or shipping costs.

Which of the Following Statements Unambiguously Describes the Term 'Contribution