Contribution equals:
ASales − Fixed cost
BSales − Total cost
CSales − Variable cost
DSales − Profit
Answer & Solution
Correct answer: C. Sales − Variable cost
1. Contribution measures how much sales contribute towards covering fixed cost and earning profit.
2. By definition: Contribution = Sales − Variable cost.
3. After fixed cost is deducted from contribution, the remainder is profit.
4. Hence the correct identity is Sales − Variable cost.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.3 ¶2_
Related questions
Absorption costing values inventory at:Marginal costing assumes fixed cost remains constant:Make-or-buy decision prefers buying when the outside price is:Limiting-factor decision picks the alternative that maximises:Angle of incidence is the angle between:Cash break-even point uses:Composite P/V ratio for a mix of Product A (P/V 50%, share 40%) and B (P/V 30%, share 60%)Continuing same data: MOS in rupees and as a percentage of sales: