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Which of the following correctly describes the concept of contribution?
(A) It is the cost of a unit of product or service which would be avoided if that unit were not produced or provided.
(B) It is the difference between sales value and the marginal cost of sales,
(C) It is the difference in units between the expected sales volume and the breakeven sales volume.
(D) It is the difference between total sales revenue and total fixed costs.Sir the answer is B … Can you please explain why not A. I am unable the point the examiner want to say.
A = variable cost (or possible opportunity cost). There is nothing here about sales price and contribution is defined as selling price – marginal (ie total variable) costs.
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