How is Total Contribution Margin (TCM) calculated?

Total Contribution Margin (TCM) is calculated by subtracting total variable costs from sales revenue. This metric is essential for understanding how much revenue is available to cover fixed costs and generate profit after accounting for the cost of producing goods or providing services that vary directly with the level of output.

The reasoning behind this is that the contribution margin provides insight into the profitability of a company's products or services. By determining how much each unit sold contributes to covering fixed costs and generating a profit, businesses can make informed decisions related to pricing, production levels, and financial forecasting.

In contrast, the other options do not accurately represent the calculation of TCM. For example, subtracting operating expenses or total fixed costs from sales does not isolate how much money is made after accounting for variable costs directly tied to production. Additionally, adding total variable costs to sales does not provide a meaningful measure for understanding contribution margin, as it mixes costs with revenue rather than calculating a margin.