2 min read
Definition
Contribution margin is sales revenue minus variable costs. It shows how much of each sale is available to cover fixed costs and, once those are met, to generate profit. It underpins break-even analysis.
In plain terms
It's the money a sale throws off after its own direct costs, before your fixed overheads. Add enough contributions together and you cover the fixed costs, then start profiting.
Why it matters for your company
Understanding contribution helps you price, prioritise products and judge growth decisions. See gross margin.
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