What metrics are used to calculate a product’s contribution margin?
What metrics are used to calculate a product’s contribution margin? Select One A.Sales, total costs B.Profit, variable costs C.Sales, variable costs D.Profit, total costs
What metrics are used to calculate a product’s contribution margin? Select One A.Sales, total costs B.Profit, variable costs C.Sales, variable costs D.Profit, total costs
C.Sales, variable costs
The correct answer is C. Sales, variable costs.
Contribution margin is a financial metric that represents the amount of revenue that is left over after deducting all variable costs associated with producing and selling a product. It is calculated by subtracting the variable costs from the product's total revenue.
The formula for calculating a product's contribution margin is:
Contribution Margin = Sales - Variable Costs
In this formula, "Sales" refers to the total revenue generated by the product, and "Variable Costs" refers to the costs that vary depending on the level of production or sales, such as raw materials, direct labor, and packaging.
Therefore, to calculate a product's contribution margin, you need to know the sales revenue and the total variable costs associated with producing and selling the product.
