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contribution margin

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Financial Dictionary

Contribution Margin

A cost accounting concept calculated as total revenue from a product or service less the total variable cost.

Investopedia Commentary

The contribution margin helps you make better decisions about pricing, adding or subtracting from a product line, how to structure sales commissions, among other things.

See also: Income Statement

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Financial Dictionary

contribution margin

The price at which a firm sells its product less the variable cost of producing the product. A company with a large contribution margin is likely to experience substantial profit increases during an economic upswing.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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