If the contribution margin is $25000 and total revenues are $60000, the total variable costs are __________?
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Answer: D. $35,000
Explanation
Subtracting contribution margin from total revenues gives total variable costs. This formula rearranges the standard contribution margin calculation equation. The resulting thirty-five thousand dollars accurately represents variable costs. Contribution margin equals total revenues minus total variable costs. Variable costs change in direct proportion to changes in production volume. Analyzing variable costs helps management control short-term operational expenses.
Financial analysts use cost breakdowns to evaluate operational efficiency. Budget managers monitor variable expenses to maintain projected profit margins. Cost-volume-profit analysis depends on separating fixed and variable costs. Option A incorrectly adds revenues and contribution margin with a negative sign. Option B results from an erroneous subtraction order producing negative costs. Option C overstates the variable cost amount through incorrect arithmetic.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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