Accounting Multiple Choice Question – 1 September 2017

Which is the correct formula for calculating contribution?

Select ONE answer:

  1. Fixed costs divided by variable costs
  2. Fixed costs less variable costs
  3. Sales revenue divided by variable costs
  4. Sales revenue minus variable costs
  5. Fixed costs plus semi-variable costs

Why is knowing the contribution or contribution margin important for any company to know?……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 4 – Contribution margin is a product’s price minus all associated variable costs, resulting in the incremental profit earned for each unit sold. The total contribution margin generated by an entity represents the total earnings available to pay for fixed expenses and to generate a profit.

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