Which of the following statements about contribution margin and gross margin in CVP analysis is TRUE?
A)Contribution margin equals total revenue minus cost of goods sold.
B)Contribution margin equals total revenue minus non-variable costs.
C)Gross margin equals total revenue minus cost of goods sold.
D)Service companies can compute a gross margin but not a contribution margin.
E)Gross margin equals total revenue minus non-variable costs.

Question

Quizplus · Accepted Answer

Gross margin equals total revenue minus cost of goods sold, while contribution margin is total revenue minus variable costs. Non-variable costs are not factored into either calculation. Service companies can also compute both gross margin and contribution margin, depending on the nature of their services.

Which of the Following Statements About Contribution Margin and Gross