ECONOMICS

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: -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-3: -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-4: -Answer and Explanation: The contribution margin per unit is the price at which a unit must be sold for the company to break even. The statement is FALSE. A product’s contribution margin is the difference between its selling price per unit and its variable cost.

Detailed explanation-5: -Contribution Margin = Revenue-Variable Costs It’s your gross profit margin minus any “variable” overhead expenses, like sales commissions. A business breaks even when contribution margin dollars equal fixed costs dollars. Your profit starts when contribution margin dollars exceed fixed cost dollars.