In Accounting Terms, Profits Are ______

question 144

Multiple Choice

In accounting terms, profits are ______.

• A) the difference between revenues and expenses
• B) the difference between commissions earned and receipts
• C) the difference between sales and expenses
• D) the sum of sales and expenses

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Definitions:

Variable Costs

Costs that change in proportion to the level of production or sales. They increase as production increases and decrease as production decreases.

Fixed Costs

Costs that remain constant regardless of the amount of production or business operations.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating the amount contributed towards covering fixed costs and generating profit.

Financial Break-even Point

The level of revenue necessary for a firm to cover all its operating expenses and financial costs, achieving a net income of zero.