The Main Purpose of the Gross Margin Is to Cover

question 15

True/False

The main purpose of the gross margin is to cover fixed costs, and when it does, you have your break-even point.

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Definitions:

Fixed Costs

Expenses that do not change in total regardless of the level of production or sales activity, such as rent or salaries.

Variable Costs

Costs that vary directly with the level of production or sales volume.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs.