Comparing Contribution Margin [CM] to Gross Margin [GM], Which of the Following

question 91

Multiple Choice

Comparing contribution margin [CM] to gross margin [GM], which of the following is TRUE?

• A)If Cost of goods sold includes fixed costs, then CM will exceed GM.
• B)If Cost of goods sold does not include any fixed costs, then CM will equal GM.
• C)In the merchandising sector, CM and GM are equivalent terms.
• D)If CM and GM remain constant from one period to the next, operating income has to remain constant as well.
• E)CM is computed after all variable costs are deducted, but GM is computed by deducting only cost of goods sold from revenues.

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Definitions:

Hegel

A German philosopher of the late Enlightenment period, known for his dialectical method and his contributions to absolute idealism.

Adam Smith

An 18th-century Scottish economist and philosopher known as the father of classical economics, best known for his works "The Wealth of Nations," which outlines the basis for free market economics.

Invisible Hand

A term used by Adam Smith to describe the self-regulating nature of the marketplace, where individual self-interest can lead to beneficial social outcomes.

Buddhists

Followers of Buddhism, a spiritual tradition that focuses on personal spiritual development and the attainment of a deep insight into the true nature of life.