Contribution Margin Formula: How to Determine Your Most Profitable Product
The contribution margin determines if a product is profitable
What is Contribution Margin?
Contribution margin definition is the difference between revenue and variable costs (sales revenue – variable costs).
What are Fixed Costs?
Fixed costs are expenses that do not fluctuate in prices or are a one-time-only expense.
FORMULA
Contribution Margin Formula
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!