The Contribution Margin Is the Difference Between Sales and Fixed

question 51

True/False

The contribution margin is the difference between sales and fixed costs.

Understand the concept and application of normal costing in manufacturing processes.

Analyze and calculate under or overapplied overhead based on different capacity measures.

Recognize the importance and mechanics of cost allocation in accounting and management.

Differentiate between various overhead rate calculations based on capacity measures.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in the cost of goods sold, treating fixed costs as period expenses.

Absorption Costing

An accounting method that captures all the manufacturing costs, including both fixed and variable costs, associated with producing a specific product.

Fixed Manufacturing Overhead

Costs associated with manufacturing that do not vary with the level of production, such as rent, salaries of supervisors, and depreciation of factory equipment.

Variable Costing

An accounting method that includes only variable production costs--such as materials, labor, and overhead--in the cost of a unit of product.