Some companies use contribution margin rather than sales revenues as the basis of incentives for motivating sales persons because it will lead them to sell more of the higher margin goods.

Question

Quizplus · Accepted Answer

Contribution margin is the amount that remains after deducting variable costs from sales revenues. By using contribution margin as the basis of incentives, salespersons are incentivized to sell products with higher contribution margins, which will increase profitability for the company. Therefore, the given statement is true.

Some Companies Use Contribution Margin Rather Than Sales Revenues as the Basis