Direct material cost of sold goods is subtracted from revenues to calculate __________?
Correct answer: C. throughput contribution
- A. accrual contribution
- B. indirect contribution
- C. throughput contribution
- D. direct contribution
Explanation
Throughput contribution is calculated by subtracting direct material cost from revenue, because direct material is treated as the only truly variable cost. It is therefore different from a broader contribution margin that may deduct other variable costs.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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