Managers Confuse Gross Margin and Contribution Margin in Merchandising Companies

question 88

Multiple Choice

Managers confuse gross margin and contribution margin in merchandising companies because:

• A)cost of goods sold equals the variable cost of goods purchased.
• B)cost of goods sold does not equal the variable cost of goods purchased.
• C)manufacturing costs does not equal the variable cost of goods manufactured.
• D)manufacturing costs are always relevant in merchandising companies.
• E)managers never confuse the margin and contribution margin in merchandising companies.

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Definitions:

Induced Consumption

Describes consumer spending that increases when income increases and decreases when income decreases, directly related to the level of disposable income.

Average Propensity

The proportion of total income or revenue that is spent on a certain category of expenditures or savings.

Save

The process of setting aside a portion of current income for future use or investment.

Obtrusively Expensive

Describing an item or service whose price is excessively high, attracting attention in a way that may seem offensive or overt.