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

question 70

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:

Units Sold

The quantity of an item sold by a company in a specific period.

Hard Rationing

A situation where companies cannot obtain funds for investment, even if they are willing to pay higher interest rates, due to external factors.

Net Present Value

A calculation that determines the current value of a series of future cash flows, discounted back to their present value at a specific discount rate.

Funding Requests

Applications or appeals for financial support, typically made by businesses or organizations to potential investors or grant bodies.