2. A contribution margin is a measure of an item’s profitability, not simply its food cost. True False

Analyzing the Statement

The statement claims that a contribution margin is a measure of an item’s profitability rather than merely its food cost.

1. Contribution Margin Definition: The contribution margin is calculated as sales revenue minus variable costs. This metric indicates how much money is available to cover fixed costs and contribute to profits after covering variable expenses.

2. Food Cost Definition: Food cost refers to the direct expenses associated with producing a particular menu item, including ingredients and direct labor costs. It does not take into account the potential contribution to overhead and profit.

Conclusion

• The contribution margin goes beyond food cost by considering total sales revenue and variable costs, making it a stronger indicator of profitability.
• Therefore, the statement is True.

Final Answer

True - A contribution margin is indeed a measure of an item’s profitability, not simply its food cost.