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

Question

Quizplus · Accepted Answer

The contribution margin approach isolates costs by their behavior, separating variable costs from fixed costs. This helps managers make short-term decisions by identifying which costs will change as production levels change, and which costs will remain the same regardless of production levels. This information allows managers to focus on the variable costs that can be controlled in the short-term, and make decisions that will maximize the contribution margin (revenue minus variable costs).

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