What each sale leaves after paying its variable costs, available to cover fixed costs and generate profit. It is expressed per unit or as a percentage of sales.
An example
Price €50 and variable cost €30: each unit contributes €20, a 40% contribution margin.
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Learn more
- How many sales do you need to make $2,000?
- Can your business break even with its current capacity?
- Should you drop a product that seems to lose money?