Q20-9RQ
Question
What is contribution margin?
Step-by-Step Solution
Verified Answer
Answer
When total variable cost is subtracted from sales revenue it results in contribution margin.
1Step 1: Contribution Margin
The positive difference of sales revenue and variable cost is contribution margin. In other words,the contribution margin covers the fixed costs to provide operating income.
2Step 2: Formula
Contribution margin = Net sales revenue – Variable costs
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