Question: In a marginal costing system, which of the following is used to assess performance?
Options:
Net profit
Gross profit
Contribution margin
Total costs
Correct Answer: Contribution margin
Solution:
In marginal costing, performance is often assessed using the contribution margin.
In a marginal costing system, which of the following is used to assess performan
Practice Questions
Q1
In a marginal costing system, which of the following is used to assess performance?
Net profit
Gross profit
Contribution margin
Total costs
Questions & Step-by-Step Solutions
In a marginal costing system, which of the following is used to assess performance?
Step 1: Understand what marginal costing is. It is a method of costing that focuses on the variable costs of production.
Step 2: Learn about the contribution margin. This is the amount remaining from sales revenue after variable costs have been deducted.
Step 3: Know that the contribution margin helps in assessing performance by showing how much money is available to cover fixed costs and generate profit.
Step 4: Realize that in a marginal costing system, businesses use the contribution margin to evaluate how well they are performing financially.
Marginal Costing – A costing technique that only considers variable costs for decision-making and performance assessment.
Contribution Margin – The difference between sales revenue and variable costs, used to evaluate profitability and performance.
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