Business & Commerce
Intermediate

Contribution Margin

The amount each unit sold contributes toward covering fixed costs and profit.

Formula

CM=Price−Variable CostCM = Price - Variable\ Cost

Variables

CMContribution margin per unit
PriceSelling price
Variable CostPer-unit variable cost

Example

$50 price − $30 variable = $20 CM

Did You Know?

Once fixed costs are covered, every additional unit’s full contribution margin drops straight to profit.

contributionmargincosting