contribution margin

  

Definition

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

Use contribution margin in a sentence

  • 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 won't make much money.

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  • When trying to decide if a new product is worth it try and work out the contribution margin to get a baseline.

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  • 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.

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