The per dollar contribution toward fixed operating costs and profits provided by each dollar of sales is the
A) profit margin.
B) contribution margin.
C) expense ratio.
D) fixed coverage ratio.

Question

Quizplus · Accepted Answer

The per dollar contribution toward fixed operating costs and profits provided by each dollar of sales is known as contribution margin. It is calculated by subtracting variable costs from sales revenue. The contribution margin ratio helps in determining the break-even point and the volume of sales needed to achieve a desired level of profit. Therefore, option B is the correct answer. A) Profit margin is the percentage of sales revenue that represents profit after all expenses have been deducted. C) Expense ratio refers to the percentage of revenue used to cover operatingexpenses. D) Fixed coverage ratio measures the ability of the company to cover its fixed expenses with its earnings.

The Per Dollar Contribution Toward Fixed Operating Costs and Profits