Direct expenses and indirect expenses are separated in determining contribution margin.

Question

Quizplus · Accepted Answer

Direct expenses are those that can be directly traced to the production of a product or service, while indirect expenses are those that cannot be directly traced to the production of a product or service. Contribution margin is the difference between sales revenue and variable expenses. Direct expenses are variable expenses, while indirect expenses are fixed expenses. Therefore, direct expenses and indirect expenses are separated in determining contribution margin.

Direct Expenses and Indirect Expenses Are Separated in Determining Contribution