Contribution is defined as
Asales revenue less total variable cost
Bsales revenue less total fixed cost
Cprofit plus total variable cost
Dfixed cost less variable cost
Answer & Solution
Correct answer: A. sales revenue less total variable cost
1. Contribution measures what a sale leaves behind once its own variable cost is met.
2. Contribution = sales revenue less total variable cost.
3. Per unit, that is selling price less variable cost per unit.
4. Fixed cost is then deducted from contribution to arrive at profit.
_Source: ICAI Cost and Management Accounting Ch14 'Marginal Costing', section 14.7.1_
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