Which of the following is correct?
A)Sales - variable costs - fixed costs = contribution margin
B)Total revenue - variable costs = contribution margin
C)Total revenue - fixed costs = contribution margin
D)Total revenue - profit = contribution margin

Question

Quizplus · Accepted Answer

Contribution margin is the amount of revenue that remains after deducting variable costs. Therefore, the correct formula for finding the contribution margin would be total revenue minus variable costs. Option A is incorrect as it includes fixed costs which are not considered while calculating contribution margin. Option C is incorrect as it only deducts fixed costs from total revenue. Option D deducts profit which is incorrect as contribution margin is a part of profit.

Which of the Following Is Correct