The contribution margin approach helps managers in short-term decision making because ________.

Question

Quizplus · Accepted Answer

The contribution margin approach isolates costs by behavior, separating variable costs from fixed costs. This helps managers make short-term decisions by understanding the impact of changes in sales volume or cost structure on the overall profitability of the company. Option A is incorrect as it does not recognize that fixed overhead costs should not be treated as product costs. Option B is incorrect because mixed costs are not the only costs reported under contribution margin. Option C is incorrect as present value is not relevant to contribution margin analysis.

The Contribution Margin Approach Helps Managers in Short-Term Decision Making