A business segment or department with a positive contribution margin contributes to increasing the net income of the business.

Question

Quizplus · Accepted Answer

A positive contribution margin means that the revenues generated by the department or segment exceed its variable costs. This excess revenue is used to cover the fixed costs of the business, and any remaining amount contributes to increasing the net income of the business. Therefore, a business segment or department with a positive contribution margin does contribute to increasing the net income of the business.

A Business Segment or Department with a Positive Contribution Margin