Q273
Fixed cost is divided by break-even revenues to calculate
A.
cost margin
B.
fixed margin
C.
revenue margin
D.
contribution margin
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
Fixed cost is divided by break-even revenues to calculate contribution margin. Contribution margin is a product's price minus all associated variable costs, resulting in the incremental profit earned for each unit sold. The total contribution margin generated by an entity represents the total earnings available to pay for fixed expenses and to generate a profit.