Which statement best describes contribution?

Which statement best describes contribution?

• A. Selling price less all fixed costs used for decision making.
• B. Selling price less all variable costs used for short-term decision making.
• C. Net profit after fixed costs.
• D. Contribution per unit times quantity.

Answer: (B)

Contribution is the amount by which sales revenue covers variable costs, leaving something to contribute toward fixed costs and profit. It reflects what is available to absorb fixed costs in the short term, so decisions are based on what varies with output. The standard way to describe it is selling price minus variable costs, which matches the option that states selling price less all variable costs and notes its use in short-term decision making. While total contribution can be written as contribution per unit times quantity, the description focused on the short-term decision context and the variable-cost deduction best captures what contribution represents.

Contribution is the amount by which sales revenue covers variable costs, leaving something to contribute toward fixed costs and profit. It reflects what is available to absorb fixed costs in the short term, so decisions are based on what varies with output. The standard way to describe it is selling price minus variable costs, which matches the option that states selling price less all variable costs and notes its use in short-term decision making. While total contribution can be written as contribution per unit times quantity, the description focused on the short-term decision context and the variable-cost deduction best captures what contribution represents.