Which of the following statements about contribution are correct?
A.If contribution is a positive figure it contributes, first, to covering fixed costs, and second, to profit.
B. In order to calculate contribution it is necessary first to split costs into fixed and variable.

Question

Which of the following statements about contribution are correct? 
A.If contribution is a positive figure it contributes, first, to covering fixed costs, and second, to profit.
B. In order to calculate contribution it is necessary first to split costs into fixed and variable.

Quizplus · Accepted Answer

Statement A is correct. Contribution is calculated by subtracting variable costs from revenue. If the resulting figure is positive, it contributes to covering fixed costs and then to profit.

Statement B is also correct. In order to calculate contribution, it is necessary to distinguish between fixed and variable costs. This is because only variable costs are deducted from revenue to calculate contribution, while fixed costs are not.

Which of the Following Statements About Contribution Are Correct