Contribution Margin Formula: How to Determine Your Most Profitable Product

The contribution margin determines if a product is profitable

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What is Contribution Margin?

Contribution margin definition is the difference between revenue and variable costs (sales revenue – variable costs).

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What are Fixed Costs?

Fixed costs are expenses that do not fluctuate in prices or are a one-time-only expense.

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FORMULA

Contribution Margin Formula

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Contribution Margin = Net Sales Revenue minus Total Variable Cost

If you’re ready to swim with the sharks, then you better know your numbers and understand how the contribution margin works!

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