Contribution Margin Analysis – Short Answer

Practice Question

Intro to Managerial Accounting
Decision-Making: Cost-Volume-Profit Analysis
Contribution Margin Analysis
Short Answer

Calculate the contribution margin if total sales are $100,000 and total variable costs are $40,000.

Answer +
Correct Answer: $60,000
Explanation +

Contribution margin = Sales – Variable Costs = $100,000 – $40,000 = $60,000.

This value is essential in assessing how much revenue is available to cover fixed costs and generate profit (Page 47).