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What is the contribution margin in CVP analysis?
What is the contribution margin in CVP analysis?
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Practice Questions
1 question
Q1
What is the contribution margin in CVP analysis?
Sales revenue minus fixed costs
Sales revenue minus variable costs
Total costs minus total revenue
Net income before taxes
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The contribution margin is calculated as sales revenue minus variable costs.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the contribution margin in CVP analysis?
Solution:
The contribution margin is calculated as sales revenue minus variable costs.
Steps: 4
Show Steps
Step 1: Understand what sales revenue is. This is the total money earned from selling products or services.
Step 2: Know what variable costs are. These are costs that change depending on how much you sell, like materials or labor directly tied to production.
Step 3: Calculate the contribution margin by subtracting the total variable costs from the total sales revenue.
Step 4: The formula looks like this: Contribution Margin = Sales Revenue - Variable Costs.
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