In marginal costing, contribution equals

In marginal costing, contribution equals

• A. Sales - all variable costs
• B. Sales - variable costs
• C. Sales - fixed costs
• D. Sales - total costs

Answer: (D)

In marginal costing, the amount left from sales after covering the costs that vary with output is known as contribution. Those variable costs change as production levels change, so contribution specifically shows how much revenue remains to cover fixed costs and, after that, to contribute to profit. Therefore, the expression that matches contribution is Sales minus variable costs. Subtracting total costs (which include fixed costs) would yield profit rather than contribution. For example, if sales are 100, variable costs are 60, contribution is 40. If fixed costs are 25, profit is 15. This distinction helps explain how marginal costing focuses on the relationship between sales, variable costs, and the fixed costs that need to be covered.

In marginal costing, the amount left from sales after covering the costs that vary with output is known as contribution. Those variable costs change as production levels change, so contribution specifically shows how much revenue remains to cover fixed costs and, after that, to contribute to profit.

Therefore, the expression that matches contribution is Sales minus variable costs. Subtracting total costs (which include fixed costs) would yield profit rather than contribution. For example, if sales are 100, variable costs are 60, contribution is 40. If fixed costs are 25, profit is 15. This distinction helps explain how marginal costing focuses on the relationship between sales, variable costs, and the fixed costs that need to be covered.