Contribution Margin

 

Contribution margin is the difference between the selling price of a product and the direct costs of producing that product. The net result is the amount of money left over to pay for indirect costs, overhead then hopefully leave a profit.

Contribution margin can be viewed from the point of view of a product, a product line, an order, or for a time period such as a month or a year for the entire product line or company, or it can be viewed in numerous other ways.

 

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