Answer :
The correct answer is C. sales minus variable cost minus fixed cost.
Contribution margin is a financial metric that represents the amount of revenue remaining after deducting the variable costs associated with producing goods or services. It measures the profitability of each unit sold and is used to analyze the impact of changes in sales volume on the company's overall profitability.
The contribution margin can be calculated by subtracting the variable costs from the sales revenue and then deducting the fixed costs. This calculation reflects the portion of sales revenue that is available to cover the fixed costs and contribute towards covering the company's overhead expenses and generating a profit.
Option A (sales minus fixed cost) only considers the fixed costs and does not take into account the variable costs, which are an essential component of the contribution margin.
Option B (fixed cost minus variable cost) subtracts the variable costs from the fixed costs, which is the opposite of what the contribution margin formula requires.
Option D (sales minus variable cost) only considers the variable costs and does not account for the fixed costs, which are necessary to determine the contribution margin.
Therefore, option C (sales minus variable cost minus fixed cost) is the correct formula for calculating the contribution margin as it takes into account both the variable costs and the fixed costs associated with generating sales revenue.
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