The correct answer is: A. Sales – Variable cost
EBIT stands for Earnings Before Interest and Taxes. It is a measure of a company’s profitability before taking into account interest and taxes. EBIT can be calculated by subtracting variable costs from sales. Variable costs are the costs of goods sold, which vary directly with the number of units sold. Fixed costs are the costs that do not vary with the number of units sold, such as rent, salaries, and depreciation.
B. Contribution – Fixed cost is not the formula for EBIT. Contribution is the amount of revenue left over after variable costs have been deducted. It is calculated by subtracting variable costs from sales. Contribution can be used to calculate break-even point, margin of safety, and target profit.
C. Sales – Fixed cost is not the formula for EBIT. Sales is the total amount of revenue generated by a company. It is calculated by multiplying the number of units sold by the price per unit. Fixed costs are the costs that do not vary with the number of units sold, such as rent, salaries, and depreciation.
D. All the above is not the correct answer. The formula for EBIT is Sales – Variable cost.