BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sales-Variable cost
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Contribution-Fixed cost
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Sales-Fixed cost
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All the above
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Detailed explanation-1: -The formula of EBIT = Contribution-Fixed cost.
Detailed explanation-2: -EBIT is calculated by subtracting a company’s cost of goods sold (COGS) and its operating expenses from its revenue. EBIT can also be calculated as operating revenue and non-operating income, less operating expenses.
Detailed explanation-3: -Fixed cost = Total cost of production-(Variable cost per unit x number of units produced)
Detailed explanation-4: -Contribution really is shorthand for the term ‘contribution to fixed costs and overheads’. If average variable cost is deducted from the unit price the amount left is a contribution to fixed costs. Contribution is the difference between price and the direct, or variable costs, of a product or service.
Detailed explanation-5: -Earnings before interest and taxes (EBIT) is a common measure of a company’s operating profitability. As its name suggests, EBIT is net income excluding the effect of debt interest and taxes.