Question

25. Contribution equals
(a) Sales minus cost of sales
(b) sales minus cost of production
(c) sales minus variable costs
(d) sales minus fixed costs​

Answer 1

Answer:

Correct option is (c) sales minus variable costs

Answer 2

Introduction:

The amount of earnings left over after deducting all direct expenditures from revenue is referred to as contribution.

Explanation:

This is the amount available to pay for any fixed expenditures incurred by a firm within a reporting period. Profit is calculated as the excess of contribution over fixed expenses.

The contribution margin (CM) is the difference between sales and total variable expenses.

As a result, the appropriate option is (c).