Contribution Margin
Accounting glossary · Understand, connect, apply
Contribution margin is sales revenue less variable costs. It shows the amount available to cover fixed costs and, after those are covered, generate operating profit in a cost-volume-profit model.
Example
A product sells for 50 and has variable cost of 30 per unit. Unit contribution is 20. Selling 400 units produces total contribution of 8,000.
Formula and assumptions
Contribution margin = sales revenue − variable costs
Remember the difference
Contribution is not the same as gross profit. Gross profit uses cost of goods sold, which can include fixed manufacturing overhead; contribution uses the stated variable-cost classification.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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