Gross margin is to absorption costing as _______________ is to variable costing.

Question

Quizplus · Accepted Answer

Absorption costing includes fixed manufacturing overhead in the cost of goods sold, whereas variable costing only includes variable costs in the cost of goods sold. As a result, gross margin is not a meaningful measure under variable costing. Instead, the comparable measure to gross margin under variable costing is the contribution margin, which represents the amount of revenue remaining after variable costs have been deducted.

Gross Margin Is to Absorption Costing as _______________ Is to Variable