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Answer :
Final answer:
The contribution margin is calculated as revenues minus variable costs, which is option C. This figure helps in assessing a firm's profitability and guiding its financial decisions.
Explanation:
The contribution margin equals revenues minus variable costs (C). This measure is used to determine how much revenue is left over after variable costs have been subtracted to contribute to fixed costs and profit. Understanding the contribution margin is essential in cost-volume-profit analysis as it helps firms make decisions about pricing, production levels, and product lines.
Accounting profit, on the other hand, is calculated as total revenues minus explicit costs, including depreciation. This represents the profit a firm makes after accounting for all explicit out-of-pocket costs.
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