Contribution margin Select one:

a. is always the same as gross profit margin.

b. excludes variable selling costs from its calculation.

c. is calculated by subtracting total manufacturing costs per unit from sales revenue per unit.

d. equals sales revenue minus variable costs.

Answer: d. Equals sales revenue minus variable costs

Explanation: contribution margin is the amount that is left over (i. e. the revenue portion left over) after variable costs have been deducted from revenue. Take note of the following:

a. Is always the same as gross profit. Incorrect.

Gross profit is calculated by taking revenue and minusing cost of sales from it. In a manufacturing company the cost of sales is the total cost of producing the goods, which includes both variable costs and fixed costs.

b. Excludes variable selling costs from its calculation. Incorrect.

This is incorrect because to calculate contribution margin variable costs needs to be deducted from revenue. Fixed costs are the costs that are excluded from this calculation.

c. Is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. Incorrect.

Total manufacturing costs includes both fixed and variable costs. Therefore deducting this from revenue will equate to the gross profit of the goods, which is not the same as the contribution margin.

d. Equals sales revenue minus variable costs. Correct.

Once again the contribution margin showcases part of the revenue that is not consumed by variable costs. Therefore it is calculated by taking revenue and only deducting variable costs from it.