Contribution margin

Contribution margin is a measure of profit margin that focuses on what proportion of sales revenue is left over after paying associated variable costs. This is the amount that is left over to cover fixed costs, or to add to profits. It is:

contribution ÷sales

where contribution is the total contribution from all units sold.

It can also be usefully expressed in a way very different from other types of margin, on a per unit basis:

contribution ÷price

where contribution is the contribution per unit.

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