Future Business Leaders of America (FBLA) Agribusiness Practice Test

Disable ads (and more) with a membership for a one time $4.99 payment

Enhance your FBLA Agribusiness knowledge with our comprehensive test. Dive into flashcards and multiple-choice questions, complete with hints and explanations, to ensure exam success. Prepare confidently for a bright future!

Practice this question and more.

How is gross margin calculated?

Total revenue minus total expenses
Estimated income above variable costs
Net income divided by total sales
Fixed costs subtracted from variable costs

The correct answer is: Estimated income above variable costs

Gross margin is calculated by determining the income that remains after accounting for the direct costs associated with producing a product or delivering a service, which are primarily variable costs. Option B accurately reflects this as it represents the estimated income above these variable costs. This figure is crucial for businesses as it indicates how efficiently a company is producing and selling its goods. By understanding gross margin, businesses can analyze their profitability at a more granular level, which is essential for making informed decisions about pricing, production, and overall financial strategy. It helps in assessing how much revenue from sales is available to cover fixed costs and contribute to net income. Thus, option B correctly captures the essence of gross margin calculation by focusing on the relationship between income and variable costs.