Contribution Margin Is the Amount That Contributes to Covering the Fixed

question 27

True/False

Contribution margin is the amount that contributes to covering the fixed costs and then to providing operating income.

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Definitions:

Actual Rate

The actual cost incurred or the price paid for materials, labor, or overhead as opposed to budgeted or standard costs.

Standard Rate

A predetermined cost that is often used in budgeting and costing exercises to estimate the expected rate for services or products.

Direct Labour

The cost associated with employees who are directly involved in the production process.

Standard Hours

The amount of labor time that is expected to be spent on a particular task or to produce a specific quantity of goods under normal conditions.