Finance
Contribution Margin
Revenue minus all variable costs, expressed in dollars or as a percentage.
Contribution Margin is the profit remaining after subtracting all variable costs (COGS plus variable marketing, sales commissions, payment processing, etc.). It represents the amount each sale contributes toward covering fixed costs and profit. Contribution margin is more decision-useful than gross margin for unit economics analysis.
Formula
Contribution Margin = Revenue - Variable Costs Example
An e-commerce sale of $100 has $40 COGS, $15 paid acquisition allocation, $3 payment processing, $5 shipping. Contribution margin = $100 - $63 = $37 (or 37%).
Related terms
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