Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Which of the following best describes the weighted average contribution margin in relation to net sales?

It is the average gross profit margin for all products, weighted by their net sales.

It is the average amount by which net sales exceed variable costs, weighted by the sales mix of each product.

It is the total net sales divided by the number of products sold.

It is the difference between net sales and fixed costs, averaged across all products.

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Verified step by step guidance

Step 1: Understand the concept of contribution margin. Contribution margin is the amount by which net sales exceed variable costs. It represents the portion of sales revenue that contributes to covering fixed costs and generating profit.

Step 2: Recognize the term 'weighted average contribution margin.' This refers to the average contribution margin across all products, adjusted (weighted) based on the sales mix of each product. The sales mix is the proportion of total sales represented by each product.

Step 3: Analyze the options provided in the problem. The correct description should align with the definition of weighted average contribution margin, which involves net sales, variable costs, and the sales mix.

Step 4: Eliminate incorrect options. For example, the option describing 'gross profit margin' is unrelated to contribution margin, and the option involving 'fixed costs' does not pertain to the calculation of contribution margin.

Step 5: Select the correct answer: 'It is the average amount by which net sales exceed variable costs, weighted by the sales mix of each product.' This accurately describes the weighted average contribution margin in relation to net sales.