Given that the cost of direct materials for goods sold is $4,500 and total sales revenue amounts to $9,000, what is the contribution margin?

Multiple choice question for Capacity Analysis and Inventory Costing. Select an option, then review the explanation below.

Explanation

The contribution margin is calculated by subtracting the direct material cost from the total revenue. Here, $9,000 (revenue) minus $4,500 (direct material cost) equals $4,500, which is the contribution margin.

Practice related questions from the same subject.

1.What term describes the operational capacity that is below the theoretical maximum capacity?
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Given that the cost of direct materials for goods sold is $4,500 and total sales revenue amounts to $9,000, what is the contribution margin?

Explanation

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