ECONOMICS

Detailed explanation-1: -Contribution margin is defined as sales (or revenues) minus variable expenses. This is the correct answer. The correct answer is ‘True.

Detailed explanation-2: -The contribution margin is computed as the selling price per unit, minus the variable cost per unit. Also known as dollar contribution per unit, the measure indicates how a particular product contributes to the overall profit of the company.

Detailed explanation-3: -Contribution margin is a measure of the amount of revenue left over after subtracting the variable costs associated with producing a product or service. This measure is used to determine how much of each sale contributes to covering fixed costs and ultimately to the profit of the business.

Detailed explanation-4: -In companies that sell products, a contribution margin is the amount of money, or profit, a product might generate for the company in a normal economy. It is also called the gross operating margin. In simple terms, it is the difference between the amount it costs to make a product and its sale price.

Detailed explanation-5: -Contribution margin is a business’ sales revenue less its variable costs. The resulting contribution dollars can be used to cover fixed costs (such as rent), and once those are covered, any excess is considered earnings.