Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Textbook Question
Chapter 7, Problem 1QC
(Learning Objective 1) The contribution margin is
- a. sales revenue minus fixed expenses.
- b. sales revenue minus cost of goods sold.
- c. sales revenue minus variable expenses.
- d. sales revenue minus operating expenses.
Expert Solution & Answer
To determine
To identify: The correct option from the given statements.
Answer to Problem 1QC
Option c. The contribution margin is sales revenue minus variable expenses.
Explanation of Solution
Contribution Margin:
Contribution margin is the excess of sales revenue after deducting variable expenses from the amount. What remains after deducting variable expenses from sales revenue, will be contributed to cover fixed costs and operating incomes.
- a. Sales revenue minus fixed expense is the incorrect option as sales revenue’s remaining amount after deducting variable expenses will be contributed to cover fixed costs.
- b. Sales revenue minus cost of goods sold is the incorrect option because costs of goods sold when deducted from sales revenue gross profit will be derived and not the contribution margin.
- c. Sales revenue minus variable expenses is the correct option as contribution margin refers to the contribution available from the sales revenue after deducting variable costs to be covered for fixed costs and operating income.
- d. Sales revenue minus operating expenses is the incorrect option because sales revenue once adjusted for cost of goods sold gross profit is derived and after deducting operating expenses from gross profit, net operating income will be derived. Contribution margin cannot be calculated by subtracting operating expenses from sales revenue.
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Students have asked these similar questions
2. Contribution margin is equal to
a. Sales - Fixed expenses
b. Sales - Selling expenses
c. Sales - Admin. expenses
d. Sales - Variable expenses
Target cost = Selling price - ______________.
a.
Cost
b.
Profit margin
c.
Revenue
d.
Expenses
1. What is the cost of goods available for sale?
2. What is the gross profit?
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Chapter 7 Solutions
Managerial Accounting (5th Edition)
Ch. 7 - (Learning Objective 1) The contribution margin is...Ch. 7 - (Learning Objective 1) The contribution margin...Ch. 7 - (Learning Objective 2) The formula to find the...Ch. 7 - Prob. 4QCCh. 7 - Prob. 5QCCh. 7 - Prob. 6QCCh. 7 - (Learning Objective 4) Which of the following is...Ch. 7 - Prob. 8QCCh. 7 - Prob. 9QCCh. 7 - Prob. 10QC
Ch. 7 - Compute unit contribution margin and contribution...Ch. 7 - Prob. 7.2SECh. 7 - Prob. 7.3SECh. 7 - Find target profit volume (Learning Objective 2)...Ch. 7 - Prob. 7.5SECh. 7 - Prob. 7.6SECh. 7 - Prob. 7.7SECh. 7 - Prob. 7.8SECh. 7 - Compute margin of safety (Learning Objective 5)...Ch. 7 - Compute and use operating leverage factor...Ch. 7 - Calculate breakeven and target profit sales...Ch. 7 - Prob. 7.12SECh. 7 - Prob. 7.13SECh. 7 - Prob. 7.14SECh. 7 - Compute margin of safety (Learning Objective 5)...Ch. 7 - Compute and use operating leverage factor...Ch. 7 - Prob. 7.17SECh. 7 - Prob. 7.18SECh. 7 - Prepare contribution margin income statements...Ch. 7 - Work backward to find missing information...Ch. 7 - Find breakeven and target profit volume (Learning...Ch. 7 - Prob. 7.22AECh. 7 - Prob. 7.23AECh. 7 - Prob. 7.24AECh. 7 - Prob. 7.25AECh. 7 - Prob. 7.26AECh. 7 - Sustainability and CVP concepts (Learning...Ch. 7 - Prob. 7.28AECh. 7 - Calculate contribution margin and breakeven...Ch. 7 - Prob. 7.30AECh. 7 - Extension of E7-30A: Multiproduct firm (Learning...Ch. 7 - Prob. 7.32AECh. 7 - Breakeven and an advertising decision at a...Ch. 7 - Prob. 7.34AECh. 7 - Prob. 7.35AECh. 7 - Prob. 7.36AECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Prob. 7.39AECh. 7 - Prob. 7.40BECh. 7 - Work backward to find missing information...Ch. 7 - Find breakeven and target profit volume (Learning...Ch. 7 - Prob. 7.43BECh. 7 - Prob. 7.44BECh. 7 - Prob. 7.45BECh. 7 - Prob. 7.46BECh. 7 - Continuation of E7-46B: Changing business...Ch. 7 - Sustainability and CVP (Learning Objective 3)...Ch. 7 - Prob. 7.49BECh. 7 - Prob. 7.50BECh. 7 - Prob. 7.51BECh. 7 - Prob. 7.52BECh. 7 - Find breakeven for a multiproduct firm (Learning...Ch. 7 - Breakeven and an advertising decision at a...Ch. 7 - Compute margin of safety and operating leverage...Ch. 7 - Use operating leverage factor to find fixed costs...Ch. 7 - Prob. 7.57BECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Prob. 7.59BECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.62APCh. 7 - Prob. 7.63APCh. 7 - Prob. 7.64APCh. 7 - Prob. 7.65APCh. 7 - Prob. 7.66APCh. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.68BPCh. 7 - Comprehensive CVP problem (Learning Objectives 1,...Ch. 7 - Prob. 7.70BPCh. 7 - Prob. 7.71BPCh. 7 - CVP analysis at a multiproduct firm (Learning...Ch. 7 - Prob. 7.73SCCh. 7 - Discussion Questions 1. Define breakeven point....Ch. 7 - Prob. 7.75ACTCh. 7 - Prob. 7.76ACTCh. 7 - Prob. 7.77ACT
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- Revenue minus all direct costing of making the goods or supplying the service is known as?a. Gross profitb. Cost of salesc. Expensesd. Net profitarrow_forwardThe difference between sales and marginal cost is______________ a. Fixed Cost b. Profit c. Sales price d. Contributionarrow_forward10) Target cost = Selling price - ______________. a. Cost b. Expenses c. Profit margin d. Revenuearrow_forward
- 1. The amount by which an item contributes towards covering fixed cost and providing for profit is known as: a. gross profit b. gross margin c. contribution margin d. net marginarrow_forwardWhich of the following is NOT one of the definitions of "Cost" concept? Select one: a. Cost means economic sacrifice, measured in terms of standard monetary unit, incurred or potentially to be incurred, as a consequence of a business decision to achieve a specific objective b. Cost is the amount of expenditure (actual or notional) incurred or attributable to a given thing c. Cost refers only to the cash paid for purchasing an item. d. Cost is a measurement, in monetary terms, of the amount of resources used for the purpose of production of goods or rendering servicesarrow_forwardSolomon Manufacturing Company was started on January 1, year 1, when it acquired $83,000 cash by issuing common stock. Solomon immediately purchased office furniture and manufacturing equipment costing $7,000 and $ 27,600, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,900 salvage value and an expected useful life of three years. The company paid $11, 100 for salaries of administrative personnel and $15, 600 for wages to production personnel. Finally, the company paid $10, 380 for raw materials that were used to make inventory. All inventory was started and completed during the year. Solomon completed production on 4, 400 units of product and sold 3,490 units at a price of $15 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)arrow_forward
- In the learning curve equation Y = aXb, the Y term represents: Multiple Choice the cumulative number of units. the labor time required to produce the first unit. the index of learning. the labor time required to produce the last single unit.arrow_forwardOn a traditional income statement, sales revenue less cost of goods sold equals Question 26 options: operating income. operating expenses. contribution margin. gross profit.arrow_forward12.Gross profit will result if: a. Sales revenue are greater than cost of goods sold. b. Operating expenses are greater than cost of goods sold. c. Operating expenses are less than net income. d. Sales revenue are greater than operating expensesarrow_forward
- Which of the following would be considered as a limiting factor to maximize the profit? O a. Book value O b. Fixed cost Oc. Contribution d. Salesarrow_forwardCalculate the net profit before the introduction of Product C. Calculate the net profit if Cullumber Company introduces Product C.arrow_forwardWhich method results in a more realistic amount for income because it matches the most current costs against revenue? a.FIFO b.Weighted average cost c.Specific identification d.LIFOarrow_forward
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