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What is the contribution margin in marginal costing?
What is the contribution margin in marginal costing?
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Practice Questions
1 question
Q1
What is the contribution margin in marginal costing?
Sales Revenue - Variable Costs
Sales Revenue - Fixed Costs
Total Costs - Profit
Sales Revenue - Total Costs
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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 marginal costing?
Solution:
The contribution margin is calculated as Sales Revenue minus Variable Costs.
Steps: 4
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Step 1: Understand that the contribution margin shows how much money is available to cover fixed costs and profit after covering variable costs.
Step 2: Identify the total Sales Revenue, which is the total amount of money earned from selling products or services.
Step 3: Identify the total Variable Costs, which are the costs that change with the level of production or sales (like materials and labor).
Step 4: Subtract the total Variable Costs from the total Sales Revenue using the formula: Contribution Margin = Sales Revenue - Variable Costs.
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