Answer :
Final answer:
The contribution margin in break-even analysis is the amount by which sales exceed variable costs, and it is critical for determining the break-even point and analyzing profitability.
Explanation:
In break-even analysis, the contribution margin is defined as the difference between the price per unit and the variable cost per unit. Specifically, it is calculated by subtracting variable costs from sales, which makes the correct answer choice 1) sales minus variable costs. The unit contribution margin illustrates how much of the price contributes to covering fixed costs and ultimately generating profit after variable costs are accounted for. For example, if an item is sold for $1.50 and the variable cost per unit is $0.30, the unit contribution margin would be $1.20. This margin plays a pivotal role in determining the break-even point and assessing the profitability of a business.
