BUSINESS ADMINISTRATION
ACCOUNTING FOR MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Detailed explanation-1: -The statement is False. Explanation: The contribution margin represents the difference between the sales price per unit and the variable cost per unit and not the total cost per unit. The contribution margin is then used to meet the fixed costs and generate operating income therefrom.
Detailed explanation-2: -The answer is False. The contribution margin is equal to the selling price minus the average variable cost (variable cost per unit).
Detailed explanation-3: -The contribution margin is calculated by subtracting the total variable costs from the total sales revenue. The formula is: Contribution Margin = Total Sales Revenue – Total Variable Costs.
Detailed explanation-4: -Contribution margin is the revenue remaining after subtracting the variable costs that go into producing a product. Contribution margin calculates the profitability for individual items that a company makes and sells.
Detailed explanation-5: -False. (Total revenues less total variable costs equal the contribution margin.)