Question

which of the following describes the variable cost and fixed-cost relationship for a product that has a high contribution margin rate

Answer 1

The amount needed to cover fixed costs and make a profit is referred to as the contribution margin. The proportion of contribution margin to sales is called the contribution margin ratio.

What makes the contribution margin so crucial?

Business owners and managers can track product profitability using this accounting term. Understanding the contribution margin is crucial because it demonstrates how much of a product's revenue is available to pay for fixed costs and add to the company's profit.

What connections exist between fixed costs and variable costs?

There are two types of production costs: variable costs and fixed costs. Variable costs vary according to the volume produced. Variable costs include, among other things, labor, commissions, and raw materials.

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