All else being equal, a company earns more income by selling high-contribution margin products than by selling an equal number of low-contribution margin products.

Question

Quizplus · Accepted Answer

Contribution margin is calculated by subtracting variable costs from the selling price of a product. Products with higher contribution margins contribute more towards covering fixed costs and generating profits, so a company will earn more income by selling high-contribution margin products than by selling an equal number of low-contribution margin products.

All Else Being Equal, a Company Earns More Income by Selling