If the Contribution Margin Ratio Is 32%, This Means That

question 2

True/False

If the contribution margin ratio is 32%, this means that every $1.00 of sales will contribute $0.32 towards covering fixed costs and generating a profit.

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Definitions:

Open Market

A system where buyers and sellers trade freely with minimal governmental restrictions, typically in reference to securities or commodities markets.

Split-off

A point in the production process where multiple products are generated from a common input.

Avoidable Cost

A cost that can be eliminated if a particular business decision is made.

Variable Production Cost

Costs that vary directly with the volume of production, including direct materials and direct labor, and sometimes variable portions of manufacturing overhead.