Contribution Margin

Loading the player...

Contribution margin is the difference between sales revenue and variable cost. It allows a company to determine the profitability of individual products by measuring how sales affect profits. In its ratio form, it is calculated as Contribution Margin ÷ Sales Revenue.

While revenue from a company’s product is how much money the company makes from selling that item, a product’s variable costs include those expenses that vary depending on the company’s production volume.

 

comments powered by Disqus
Related Articles
  1. Selling, General & Administrative Expenses (SG&A)
    Investing Basics

    Selling, General & Administrative Expenses (SG&A)

  2. The Operating Leverage And DOL
    Fundamental Analysis

    The Operating Leverage And DOL

  3. Reading The Inventory Turnover
    Fundamental Analysis

    Reading The Inventory Turnover

  4. Calculating Net Income
    Investing

    Calculating Net Income

  5. Examining Costs Of Goods Sold (COGS)
    Investing

    Examining Costs Of Goods Sold (COGS)

  6. Return On Investment - ROI
    Term

    Return On Investment - ROI

  7. Return On Capital Employed (ROCE)
    Term

    Return On Capital Employed (ROCE)

Trading Center