2 min read
Price − variable costPer sale
Covers fixed costsThen profit
Definition
Contribution margin is the selling price of a unit minus its variable cost. What remains "contributes" to covering fixed costs, and beyond break-even, to profit. It drives your break-even point.
In plain terms
It is how much each sale actually puts towards the bills and the bottom line, once you have paid for making that sale.
Why it matters for your company
Contribution margin underpins pricing and break-even decisions, and shows how borrowing (which raises fixed costs) shifts the sales you must make. Use the break-even with loan calculator.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.