alleryStart learning →Contribution margin per unit is available to cover which costs first?
AThe sales tax
BThe fixed costs
CThe variable costs
DThe selling price
Answer & Solution
Correct answer: B. The fixed costs
1. Contribution margin is defined after variable costs are taken out.
2. Contribution margin is selling price minus total variable cost per unit.
3. Variable costs have therefore already been covered.
4. What remains contributes toward the fixed costs.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 3 'Cost-Volume-Profit Analysis'_
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