Some Companies Use Contribution Margin Rather Than Sales Revenues as the Basis

question 8

True/False

Some companies use contribution margin rather than sales revenues as the basis of incentives for motivating sales persons because it will lead them to sell more of the higher margin goods.

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Definitions:

Output

The total amount of goods or services produced by a firm, industry, or economy within a given period.

Short-Run Supply

The supply of goods that varies with changes in price in the short term, where at least one factor of production is fixed.

Average Variable Cost

The total variable costs divided by the quantity of output produced, indicating the average cost of production per unit when fixed costs are excluded.

Marginal Cost

The additional cost incurred by producing one more unit of a product or service.