The amount by which a company's sales can decline before losses are incurred is called the:______.

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25-08-2022
Business

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The amount by which a company's sales can decline before losses are incurred is called the:______.

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choprayogita110 choprayogita110 · Answer 1 · 2022-08-31T07:53:05+02:00

The amount by which a company's sales can decline before losses are incurred is called the contribution margin.

Selling price per unit less variable cost per unit equals contribution margin, often known as dollar contribution per unit. The amount of sales revenue referred to as "Contribution" is the fraction that is not used to pay variable costs and hence helps to cover fixed costs.

The total amount of revenue left over after variable costs to pay for fixed costs and turn a profit for the business is shown by the contribution margin, according to Knight. This could be viewed as the portion of sales that helps to cover fixed expenses.

Learn more about contribution margin here

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