For Planning, Control, and Decision-Making Purposes

question 1

Multiple Choice

For planning, control, and decision-making purposes:

• A)fixed costs should be converted to a per unit basis.
• B)discretionary fixed costs should be eliminated.
• C)variable costs should be ignored.
• D)mixed costs should be separated into their variable and fixed components.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted.

Contribution Margin

Contribution Margin is the selling price per unit minus the variable cost per unit, indicating how much of a product's sales contribute towards fixed expenses and profit.

Net Income

The profit of a company after all expenses and taxes have been subtracted from total revenue; a key indicator of financial health.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much contributes to covering fixed costs.