Question

Which of the following describes the contribution margin? Select one: a. Sales price minus variable costs b. Will generate a profit after all fixed costs are covered c. At break-even, it will equal fixed costs d. All of the above

Answer 1

Ans.	Option D   All of the above
	*Explanations:
	*Contribution margin is the difference between selling price and variable cost.
	*Net profit can be calculated by deducting fixed costs from contribution margin.
	*On the point of break even, the company's contribution margin is equal to its fixed
	cost because on the break even level of sales the operating income of
	company becomes zero and operating income is the difference between
	contribution margin and fixed cost.
	*So, all the above options describe the contribution margin.