Definition of Contribution margin:
Formula: Price per unit - cost per unit - variable operating expenses per unit.
How to use Contribution margin in a sentence?
- 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.
- 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.
- 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