COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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is sales less cost of goods sold
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is revenue remaining after deducting variable costs
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may be expressed as unit contribution margin
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Detailed explanation-1: -The contribution margin can be stated on a gross or per-unit basis. It represents the incremental money generated for each product/unit sold after deducting the variable portion of the firm’s costs. The contribution margin is computed as the selling price per unit, minus the variable cost per unit.
Detailed explanation-2: -Contribution margin can be thought of as the fraction of sales that contributes to the offset of fixed costs. Alternatively, unit contribution margin is the amount each unit sale adds to profit: it is the slope of the profit line.
Detailed explanation-3: -The Contribution margin per unit is the selling price of one unit of goods minus the variable costs of making that unit. The contribution margin per unit is the amount of money each sale contributes towards paying fixed costs. Once the fixed costs are paid, it will indicate how much profit is earned per unit sold.
Detailed explanation-4: -A business’s contribution margin-also called the gross margin-is the money left over from sales after paying all variable expenses associated with producing a product. Subtracting fixed expenses, such as rent, equipment leases, and salaries from your contribution margin yields your net income, or profit.