Contribution margin

Contribution margin,

Definition of Contribution margin:

  1. Formula: Price per unit - cost per unit - variable operating expenses per unit.

How to use Contribution margin in a sentence?

  1. If you are going to be selling a lot of goods you must make sure that in the end the contribution margin will be favorable.
  2. Even though a company may have a very high revenue, if they have high variable costs and only a slightly higher selling price per unit, their contribution margin will still be low so they wont make much money.
  3. When trying to decide if a new product is worth it try and work out the contribution margin to get a baseline.

Meaning of Contribution margin & Contribution margin Definition