The contribution margin is:
A) Used to determine the amount of fixed costs needed
B) Total fixed costs plus total variable costs
C) The dollars that contribute to fixed costs and then to profit once fixed costs are covered
D) Not necessary when we solve for the volume of units sold at target profit

Question

Quizplus · Accepted Answer

The contribution margin is the difference between total revenue and total variable costs. It represents the dollars that contribute to covering fixed costs and then to profit once fixed costs are covered. It is an important measure for determining the break-even point and target profit for a product or service. Therefore, option C is the correct answer while options A, B, and D are incorrect.

The Contribution Margin Is