Sales, gross profit, and contribution — choose the correct set of definitions Select the statements that correctly define gross profit, gross profit percentage, contribution ratio, and contribution.

Introduction / Context:Financial performance analysis separates margin sources: gross profit reflects product-level profitability before overheads; contribution focuses on covering fixed costs and generating operating profit. Correct definitions are crucial in pricing, product mix, and break-even analysis.

Given Data / Assumptions:

• Sales revenue, cost of goods sold (COGS), variable costs, and fixed costs are defined per standard managerial accounting.
• Percentages and ratios are computed over consistent periods.
• No unusual accounting policies distort the basics.

Concept / Approach:Gross profit isolates manufacturing/merchandising margin: sales – COGS. Contribution measures how much sales exceed variable costs, available to cover fixed costs and profit. The contribution ratio (or P/V ratio) is contribution / sales, useful for break-even and sensitivity analyses.

Step-by-Step Solution:State gross profit: GP = sales – COGS.Define gross profit percentage: GP% = GP / sales (or per-unit basis) interpreted as average margin on sales.Define contribution: Contribution = sales – variable costs.Define contribution ratio: CR = contribution / sales.All listed statements align, so choose “All of these”.

Verification / Alternative check:Break-even formula uses contribution: break-even sales = fixed costs / contribution ratio, confirming the definitions are internally consistent.

Why Other Options Are Wrong:Any single choice is incomplete; “All of these” captures the full, correct set.

Common Pitfalls:

• Confusing gross profit (after COGS) with contribution (after variable costs, which may differ from COGS if some items are fixed).
• Mixing percentage bases (per-unit vs total sales) when computing margins.

Final Answer:All of these